Artemis Strategic Bond Fund
Fund Manager's Comment
Data as at 30 June 2010
Government Bonds
The peripheral European bond market continued to suffer in June. The market is beginning to price in the default of Greek bonds. Meanwhile, ‘safe haven’ US, German and UK bonds (after the Budget) have performed well.
Investment grade
Corporate bonds continued to perform well. The new issue market struggled to open, but eventually some deals were priced. Fears of the aftermath from the sovereign crisis continue to weigh on financial bonds.
High Yield
The high yield market has been broadly unchanged over the month, demonstrating a lot of resilience in the face of much weaker equity markets.
The BP disaster sent their bonds (as well as their equity) on down over the last month. We used this opportunity to look to buy bonds, some at a yield of 9.5%. We believe that the free cashflow generated by this company is so great that they can withstand the high costs associated with the cleanup. Ultimately, the dividend being stopped for now makes the bonds safer.
We took part in the new Porterbrook Rail (train leasing company) and added to more of our existing holdings. Overall, liquidity has been low with investment banks not looking to take risk onto their books.
Banks are taking some time to sort out their balance sheets after the financial crisis of two years ago. European banks are in the headlights with announcements about solvency tests likely to be leaked over the next few months. Further, Basel III rules for banks are due to be announced during July. This should all start to set better ground rules for the banks and we will better understand the scale of some of their problems as the summer develops. This should help bank bonds to improve. Clarity is the missing factor for banks at the moment, hampering their ability to lend and bond markets to lend to them.
The background to corporate bonds is very positive as companies focus on their balance sheet strength. We had no better example than the Prudential last month, whose bid for AIA was rejected by shareholders unprepared for the perceived risk in the acquisition. Balance sheet strength remains a priority. This is good news for bondholders. Meanwhile high yield bonds will remain well supported whilst interest rates stay so low. Defaults are falling sharply, providing good underlying support for this asset class.
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) | £462.2m |
| Distribution yield | 6.0% |
| Unit offer price (Class Q dist. units) | 50.93p |
| Unit bid price (Class Q dist. units) | 47.67p |
| Unit offer price (Class Q acc. units) | 64.37p |
| Unit bid price (Class Q acc. units) | 60.24p |
| 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 June 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)† | 20.5 | 20.5 | 8.0 | 23.2 | 3.1 |
| iBoxx Sterling non gilts (TR)† | 19.6 | 19.6 | 17.5 | 15.9 | 5.9 |
| Sector Average | 10.9 | 10.9 | 7.5 | 17.8 | 3.6 |
| Position in Sector | 9 | 9 | 30 | 20 | 53 |
| Funds in Sector | 42 | 42 | 53 | 64 | 65 |
| Quartile | 1 | 1 | 3 | 2 | 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 June 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 |
|---|---|---|---|---|
| 23.2 | -9.6 | -3.0 | 6.4 | 4.9 |
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 June 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 June 2010.
Asset Allocation*
*Without cash. Source: Internal
Top Ten Holdings*
| Lloyds TSB 7.625% 2025 | 2.1% |
|---|---|
| Australia & New Zealand Banking Group 6.54% VAR PERP REGS GBP | 1.9% |
| GE Capital | 1.9% |
| Henderson Group 6.5% 2012 | 1.8% |
| National Express 6.25% 2017 | 1.7% |
| Go-Ahead Group 5.375% 2017 | 1.6% |
| Glencore Finance 8% EMTN Perp USD | 1.6% |
| HSBC 6.375% 18/10/22 | 1.6% |
| Reed Elsevier 7% 2017 | 1.6% |
| ING 5.14% FRN PERP GBP | 1.6% |
* Without cash.
Source: Internal.
Market Sector Split*
| Banks | 22.5% |
|---|---|
| Financial Services | 18.8% |
| Insurance | 11.6% |
| Telecommunications | 9.6% |
| Travel & Leisure | 8.0% |
| Industrial Goods & Services | 6.6% |
| Utilities | 6.6% |
| Personal & Household Goods | 3.7% |
| Chemicals | 2.6% |
| Other | 10.0% |
* 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.
