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Private investors

Artemis Monthly Distribution Fund

All data as at 28 February 2017 except where specified
  • Summary
  • About the fund
  • Performance (class R)
  • Performance (class I)
  • Composition
  • Key facts
  • Investment insights
  • Literature
  • How to invest

The fund’s aims

The fund aims to achieve an income in addition to capital growth through an actively managed combination of global equities, bonds and cash.

Current prices and yield
(class R)

As at noon, 22 March 2017
Bid price (acc units)87.42p
Bid price (dist units)72.04p
Offer price (acc units)92.66p
Offer price (dist units)76.36p
Historic yield (acc units)3.80%
Historic yield (dist units)3.96%

Investment information
(class R)

Minimum lump sum investment£10,000
Ongoing charge (acc units)1.64%
Ongoing charge (dist units)1.64%

The initial charge is currently waived. The ongoing charge includes the annual management charge of 1.5% and is shown as at the date of the Key Investor Information Document (KIID), where a full explanation of the fund's charges can be found.

Fund managers’ update

Government bonds were surprisingly strong in February. Gilts seemed to rally in anticipation of a weaker economy associated with Brexit. The fear of a breakup of the eurozone, meanwhile, forced naturally pessimistic bond investors to seek the safest of havens - so German bunds witnessed strong demand despite their substantially negative yields. Because we continue to run a short gilt position, this flight to safety has been unhelpful for the fund’s short-term performance.

The fear of a breakup of the eurozone, meanwhile, forced naturally pessimistic bond investors to seek the safest of havens…

On the other hand, our overweight position in financial bonds - especially those junior bonds known as ‘cocos’­ - helped. These bonds count towards a bank’s capital and offer relatively high yields but can be converted into equity or written off entirely should the issuing bank’s capital drop below a certain level. Because the steepening yield curves and higher interest rates (especially in the US) are expected to boost banks’ profitability, they have rallied strongly. Furthermore, banking regulation is likely to be loosened somewhat under Trump’s presidency and the Department of Justice’s fines are nearing their conclusion.

Further, the fund’s weighting to high-yield bonds has been helpful. Demand for the asset class has been strong - so much so that yields for some short-call bonds are negative. We have sold these. We were fortunate that technical issues mean our RWE bonds will no longer count as capital. This means they are effectively becoming senior bonds and a re-rating has taken place. This has helped their performance.

In equities, the powerful rally in cyclical ‘value’ stocks seen in the second half of last year paused for breath in February. So the fund’s best performers tended to be more defensive holdings such as Rai Way (an Italian infrastructure company) and Imperial Brands. For now, the equity market seems to be following the more cautious mood evident in the bond market. The outlook for government bonds, however, continues to look difficult. We have been slightly surprised by recent fall in yields and continue to believe that sustained economic growth, higher inflation and higher global interest rates will push yields higher in time.

The main danger, of course, lies in politics. Given the unpredictability of recent election results, the imminent French elections are making bond markets nervous. Although a win for Marine Le Pen remains highly unlikely, it would be a disaster for the euro.

We have been pleased with the outperformance of our bank bonds and feel this has further to run. Despite their good performance, yields remain attractive. Meanwhile, capital levels are higher and fines for misconduct are becoming a thing of the past - so banks are becoming ever more bond-friendly. Further, we think our hybrid and high-yield bonds still have room to outperform. The fundamentals remain positive and supply is dwindling, especially in sterling. In equities, we retain exposure to more economically sensitive areas. Although sentiment is against them, news from our holdings in this area remains very strong. BHP Billiton, for instance, reported a 65% increase in underlying earnings and, signalling management’s confidence, increased its dividend.

16 September 2016

James Foster: Issues of antithesis …

Maintaining the optimum yield from the Artemis Monthly Distribution Fund remains the managers’ priority, says James Foster.

Value of £1,000 invested at launch to 28 February 2017

Value of £1,000 invested at launch to 28 February 2017

Data from 21 May 2012. Source Lipper Limited, distribution units, bid to bid in sterling to 28 February 2017. All figures show total returns with dividends reinvested.

Asset allocation

Asset allocation

Source: Artemis as at 28 February 2017. Please note figures may not add up to 100% due to rounding.

Percentage growth (class R)

12 months to 31 December17.1%7.1%8.3%17.1%n/a
12 months to 28 February23.7%-0.9%11.8%11.2%n/a
Please remember that past performance is not a guide to the future. Source: Lipper Limited, distribution units, bid to bid in sterling. All figures show total returns with dividends reinvested. As the fund was launched on 21 May 2012, complete five year performance data is not yet available.

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James Foster: Issues of antithesis …

Security Code

About the fund

The Artemis Monthly Distribution Fund gives investors access to the income-generating potential of both bonds and equities. It uses the dividends and interest payments from these with the aim of generating a regular income for investors.

Global markets contain a wealth of shares that pay solid, sustainable dividends. Bonds also generate a regular and stable income.

Blending the two offers some of the capital and income growth potential of equities, along with the lower volatility and greater predictability of bonds.

  • Monthly income: designed for investors who want a regular income from their investment.
  • Company dividends: within equities, the focus is on looking for quality companies worldwide with positive cashflows to fund future dividend payments.
  • Bond income: the managers determine the appropriate allocation between different types of bonds (government, investment-grade and high-yield). They undertake a credit assessment on individual bonds, looking for those that offer the most value, given the level of risk involved.
  • Experienced managers: jointly managed by James Foster (Artemis Strategic Bond Fund) and Jacob de Tusch-Lec (Artemis Global Income Fund), the fund draws on the collective experience of Artemis’ equity and fixed income teams.

Reasons to consider

The fund may be suitable for investors looking for:

  • the prospect of a monthly income with the potential for capital growth
  • exposure to the growth potential of companies around the world
  • a relatively cautious approach compared to income funds focused solely on equities
  • an experienced management team

Introducing the fund

James Foster, co-manager of the Artemis Monthly Distribution Fund (with Jacob de Tusch-Lec) introduces the Artemis Monthly Distribution Fund, explaining its aim and their investment approach.

Risk considerations

Before making an investment, investors should consider the level of risk they’re comfortable taking with their money.

  • This fund invests mostly in a blend of equities and bonds. The equities are, primarily, substantial, stable businesses. The bonds it holds are issued by governments and large companies.
  • The managers carefully scrutinise bond issuers (governments and companies) before investing. Some of the bonds the fund holds may be issued by lower quality issuers; they pay a higher return but carry a higher risk that the issuer may not be able to make payments on them.  Overall, the managers aim to balance the level of risk across the fund’s portfolio.
  • The fund can also use more complex financial instruments, which can involve more risk, and a proportion of the fund’s investments may be in emerging markets, which can be more volatile than mature markets.
  • Although the fund aims to pay out a regular monthly income, in extreme market conditions, this may not be possible.
  • This fund’s ‘SRRI’ risk rating, a measure of how volatile the fund’s performance has been over time, is currently 4, in a range of 1 (lower risk) to 7 (higher risk).

More detailed information on fund risks is included in the ‘risk warnings’ section below.

Risk warnings

To ensure you understand whether this fund is suitable for you, please read the Key Investor Information Document, which is available, along with the fund’s Prospectus, from

The value of any investment, and any income from it, can rise and fall with movements in stockmarkets, currencies and interest rates. These can move irrationally and can be affected unpredictably by diverse factors, including political and economic events. This could mean that you won’t get back the amount you originally invested.

The fund’s past performance should not be considered a guide to future returns.

The payment of income is not guaranteed.

Because one of the key objectives of the fund is to provide income, the annual management charge is taken from capital rather than income. This can reduce the potential for capital growth.

The fund may use derivatives (financial instruments whose value is linked to the expected price movements of an underlying asset) for investment purposes, including taking long and short positions, and may use borrowing from time to time. It may also invest in derivatives to protect the value of the fund, reduce costs and/or generate additional income. Investing in derivatives also carries risks, however. In the case of a ‘short’ position, for example, if the price of the underlying asset rises in value, the fund will lose money.

The fund may invest in emerging markets, which can involve greater risk than investing in developed markets. In particular, more volatility (sharper rises and falls in unit prices) can be expected.

The fund may invest in fixed-interest securities. These are issued by governments, companies and other entities and pay a fixed level of income or interest. These payments (including repayment of capital) are subject to credit risks. Meanwhile, the market value of these assets will be particularly influenced by movements in interest rates and by changes in interest-rate expectations.

The fund may invest in higher yielding bonds, which may increase the risk to your capital. Investing in these types of assets (which are also known as sub-investment grade bonds) can produce a higher yield but also brings an increased risk of default, which would affect the capital value of your investment.

The fund holds bonds which could prove difficult to sell. As a result, the fund may have to lower the selling price, sell other investments or forego more appealing investment opportunities.

The historic yield reflects distribution payments declared by the fund over the previous year as a percentage of its mid-market unit price. It does not include any preliminary charge. Investors may be subject to tax on the distribution payments that they receive.

The additional expenses of the fund are currently capped at 0.14%. This has the effect of capping the ongoing charge for the class I units issued by the fund at 0.89% and for class R units at 1.64%. Artemis reserves the right to remove the cap without notice.

Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.

Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.

Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.

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