Artemis Strategic Bond Fund
Fund Manager's Comment
Data as at 30 December 2011
Government Bonds
While politicians argue, bonds are buffeted with every news headline. This volatility discourages investors. Yields for peripheral bonds ended near enough at record highs, though the safe havens of the UK and US continued to perform well.
Investment grade
Bank bonds benefitted, despite the political uncertainty, from a number of liability management exercises where bonds were bought back by the bank to raise equity capital.
Investment grade bonds were otherwise rather subdued with limited new issuance, except in US dollars, throughout the month.
High Yield
A good month partly due to better equity markets and with investors using some of their large cash balances in the run up to Christmas.
Fund moves
We continued to buy more US treasuries as a safe haven from all the worries in Europe. They now make up over 8% of the fund. We bought more Eksportfinans, an implicit (but not explicit) trade finance company based in Norway at approx 10% yield, after a severe downgrade by the rating agencies to high yield. We do not agree with the rating agencies and feel that Norway will support this credit. We took advantage of the strong performance in banks to reduce our holdings. Further we reduced our holdings in some of the more volatile high yield names as the market rallied.
Outlook
The US and UK government bond markets continue to look expensive. But while European politicians bicker, they appear a comparative safe haven. For now, we feel that they are a good hedge against the European uncertainty. During last year, the likelihood of the euro collapsing seemed to increase as European politicians refuse to countenance either quantitative easing or a full fiscal union. It now looks a much greater prospect than before; but we would still not expect a complete break up - though Greece and Portugal may struggle to stay in the single currency. The debate about Italy will rage for months, if not years to come.
As important have been the interventions by the ECB over the last month. Huge cash injections at very low rates have been made available to the banking system to prevent another full blown credit crunch. It is very explicit support for the banking system and highlights the critical nature of the sector to the whole European economy. Meanwhile, more equity capital is being demanded for banks (and insurance companies), making them safer investments.
The high yield market will also be volatile, but may well be the best performing market over the year. High coupons, low interest rates and a benign default rate environment are all positives.
Fund Managers
James Foster
Managers of the Artemis Strategic Bond Fund Fund since launch
Fund Managers
Alex Ralph
Managers of the Artemis Strategic Bond Fund Fund since launch
Awards
Strategic Bond PDFKey Facts
| IMA Sector | £ Strategic Bond |
|---|---|
| Sedol - Quarterly Dist | B09DMK3 |
| Sedol - Quarterly Acc | B09DMJ2 |
| Fund Size (offer basis) | £531.7m |
| Distribution yield | 5.8% |
| Unit offer price (Class Q dist. units) | 50.55p |
| Unit bid price (Class Q dist. units) | 47.26p |
| Unit offer price (Class Q acc. units) | 68.10p |
| Unit bid price (Class Q acc. units) | 63.66p |
| 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 | 1.08% |
Data as at 30 December 2011. 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)† | 27.3 | 15.8 | 43.2 | -2.1 | -5.9 |
| iBoxx Sterling non gilts (TR)† | 30.8 | 25.4 | 28.4 | 6.9 | 4.0 |
| Sector Average | 17.4 | 12.2 | 32.6 | 2.2 | -0.3 |
| Position in Sector | 4 | 18 | 22 | 51 | 57 |
| Funds in Sector | 36 | 41 | 54 | 66 | 66 |
| Quartile | 1 | 2 | 2 | 4 | 4 |
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 December 2011. 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
| 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|
| -2.1 | 11.2 | 31.5 | -20.2 | 1.3 |
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 December 2011.
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 December 2011.
Asset Allocation*
*Without cash. Source: Internal
Top Ten Holdings*
| US Treasury 2% 2021 | 8.5% |
|---|---|
| Eksportfinans | 1.7% |
| Taylor Wimpey plc 10.375% 2015 | 1.6% |
| Imperial Tobacco 5.5% GTD NTS 22/NOV/2016 GBP50000 | 1.6% |
| BAA plc 7.125% 2017 | 1.5% |
| Henderson Group 6.5% 2012 | 1.5% |
| National Express Group plc 6.25% 2017 | 1.5% |
| GE Capital Trust V | 1.5% |
| Investec Bank plc 9.625% 2022 | 1.5% |
| Go-Ahead Group plc 5.375% 2017 | 1.5% |
* Without cash.
Source: Internal.
Market Sector Split*
| Banks | 26.2% |
|---|---|
| Financial Services | 14.9% |
| Travel & Leisure | 9.2% |
| Telecommunications | 8.1% |
| Insurance | 7.7% |
| Utilities | 7.1% |
| Media | 6.6% |
| Industrial Goods & Services | 6.0% |
| Personal & Household Goods | 4.5% |
| Other | 9.7% |
* 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.
