Artemis Strategic Bond Fund
Fund Manager's Comment
Data as at 30 September 2010
Government bonds
Little movement in government bonds over the entire month, though some volatility as the US and UK governments debated more quantitative easing (QE).
Peripheral government bonds were split. Portugal and Ireland continued to suffer, but Spain and Italy recovered their poise.
Investment grade
A very exciting month for bank bonds as the Basel III regulations were announced. This was perceived to increase the likelihood of junior bonds being called at their call dates. The new regulations, overall, improved sentiment.
A busy month for new issuance especially in the US and Euro markets though less in Sterling.
High yield
The positive tone in equity markets fed through to high yield bonds, which performed well throughout September.
We have stayed short of futures which benefitted us early on. But most of these gains were wiped out after the Fed and BoE officials pondered further QE.
We took advantage of the rally in financial bonds to reduce the risk in this area by selling some Swiss Re and Barclays junior subordinated bonds. Not that we dislike these bonds, but rather we were taking some risk off the table in a rising market. Subsequently as these have traded a little lower, we bought back some Barclays bonds. We have also dipped into Bank of Ireland bonds after the Irish announced the restructuring of their banks.
We bought a number of the new high yield issues from Reynolds, Dixons and Continental. We took profits from some of our BB names to invest in the new positions.
We remain concerned about the government bond market despite the threat of QE. If there is more QE, then we would use this as an opportunity to sell more futures. That is because we fear that inflationary pressures (inflation is still above target) are building further; and the government market is overly pessimistic on growth concerns.
The investment grade market is still split between banks and corporate bonds. We are seeing further improvement in bank profitability and a more sympathetic regulatory environment. Meanwhile, corporate bonds are subject more to the vagaries of the underlying government market. We are therefore becoming somewhat more cautious.
The high yield market remains well supported from strong cashflow into the sector as the hunt for yield continues. We remain comfortable that falling default rates and an improving economy will mean this market should be very resilient.
Awards
Strategic
Bond PDFKey Facts
| IMA Sector | £ Strategic Bond |
|---|---|
| Sedol - Quarterly Dist | B09DMK3 |
| Sedol - Quarterly Acc | B09DMJ2 |
| Fund Size (offer basis) | £476.0m |
| Distribution yield | 5.40% |
| Unit offer price (Class Q dist. units) | 54.14p |
| Unit bid price (Class Q dist. units) | 50.81p |
| Unit offer price (Class Q acc. units) | 69.15p |
| Unit bid price (Class Q acc. units) | 64.89p |
| Valuation (UK business days) | 12:00 |
| Minimum lump sum investment | £1,000 |
|---|---|
| Minimum monthly investment | £50 |
| Launch | 1 June 2005 |
| Launch price | 50p |
| Preliminary charge | 5.25% |
| Annual Management Fee | 1.00% |
| Unit type | Distribution & Accumulation |
| Distribution pay dates (Class Q units) | 30 Apr, 31 Jul, 31 Oct, 31 Jan |
| Year end | 31 March |
| Total Expense Ratio | 1.09% |
Data as at 30 September 2010. Class M units are available for investments over £25,000. For more information, please contact us.
Performance
| Since Launch* | 5 Years | 3 Years | 1 Year | 6 Months | |
|---|---|---|---|---|---|
| Strategic Bond Fund (TR)† | 29.8 | 26.7 | 16.6 | 14.4 | 4.5 |
| iBoxx Sterling non gilts (TR)† | 25.3 | 24.3 | 20.9 | 11.5 | 6.8 |
| Sector Average | 16.5 | 14.9 | 12.5 | 11.1 | 4.1 |
| Position in Sector | 4 | 5 | 22 | 19 | 35 |
| Funds in Sector | 39 | 39 | 49 | 60 | 61 |
| Quartile | 1 | 1 | 2 | 2 | 3 |
Please remember that past performance is not a guide to the future.
* Data from 30 June 2005, due to the fixed price period of the fund. Source: Lipper Limited, bid to bid in sterling with net income reinvested to 30 September 2010. All figures show total returns. †Percentage Growth. Sector is IMA £ Strategic Bond.
Percentage Growth
Artemis Strategic Bond Fund Fund 12 Months to 31 December 2009
| 2010 | 2009 | 2008 | 2007 | 2006 |
|---|---|---|---|---|
| 14.4 | 12.8 | -9.6 | 2.6 | 5.9 |
Further Discrete Performance periods.
Source: Lipper Limited, bid to bid in sterling with net income reinvested. All figures show total returns.
Value of £1,000 invested at Launch to 30 September 2010.
Data from 30 June 2005, due to the fixed price period of the fund. Source Lipper Limited, bid to bid in sterling with net income reinvested to 30 September 2010.
Asset Allocation*
*Without cash. Source: Internal
Top Ten Holdings*
| GE Capital V | 1.9% |
|---|---|
| Henderson Group 6.5% 2012 | 1.9% |
| National Express 6.25% 2017 | 1.9% |
| Bank of Scotland 8.117% PERP GBP | 1.9% |
| Lloyds TSB 7.625% 2025 | 1.9% |
| Australia & New Zealand Banking Group 6.54% VAR PERP REGS GBP | 1.8% |
| Go-Ahead 5.375% 2017 | 1.8% |
| HSBC 6.375% 18/10/22 | 1.8% |
| Reed Elsevier 7% 2017 | 1.8% |
| Cable & Wireless 8.625% 2019 | 1.8% |
* Without cash.
Source: Internal.
Market Sector Split*
| Banks | 23.9% |
|---|---|
| Financial Services | 20.7% |
| Travel & Leisure | 12.5% |
| Telecommunications | 11.2% |
| Insurance | 11.0% |
| Industrial Goods & Services | 7.9% |
| Utilities | 6.5% |
| Media | 4.3% |
| Personal & Household Goods | 4.1% |
| Other ** | -2.1% |
* Without cash.
Source: Internal.
Risk Warning
Issued by Artemis Fund Managers Limited, which is authorised and regulated by the Financial Services Authority (www.fsa.gov.uk), 25 The North Colonnade, Canary Wharf, London E14 5HS and is a member of the IMA. Artemis Fund Managers Limited is a member of the Artemis Marketing Group. We only market our own unit trusts. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested. In order to offer a higher yield, a proportion of the Artemis Strategic Bond Fund will be invested in higher risk securities that may increase the risk to your capital. In particular, there can be no assurance that capital appreciation will occur in the early years as initial charges are levied on your investment and charges are not made uniformly throughout the life of your investment. Investments in fixed interest securities and bonds are subject to credit and market risk. The value of the underlying assets and therefore the value of units in this Fund will be impacted by fluctuations in interest rates and the perceived credit risk of an issuer.
All data is sourced internally unless otherwise stated.
The distribution yield reflects the amounts that may be distributed over the next twelve months as a percentage of the mid-market unit price of the fund as at the date shown. It does not include any preliminary charge and investors may be subject to tax on distributions. The distribution yield is also the underlying yield for the fund.
