Most consistent funds of the decade: Corporate Bond
Invesco Perpetual’s star bond duo top the tables in the IMA Sterling Corporate Bond sector over the past decade.
By Jenna Voigt, Features Editor
Thursday October 18, 2012
The £5.8bn Invesco Perpetual Corporate Bond fund
, managed by FE Alpha Manager Paul Causer
and Paul Read
, has been one of the most consistent fund over the two consecutive five year periods since 2002.
The fund is one of six in the IMA Sterling Corporate Bond
sector to achieve top-quartile returns over the period, alongside vehicles from major asset managers Schroders, Fidelity and BlackRock.
Table: Top-quartile funds over the past decade
Source: FE Analytics
|| 2002-2007 (%)
|Invesco Perpetual Corporate Bond
|Schroder All Maturities Corporate Bond
| Schroder Long Dated Corporate Bond
| Fidelity Institutional UK Long Corporate Bond
| BlackRock Corporate Bond
| Newton Long Corporate Bond
| Sector average
While the Invesco vehicle topped the tables in the five year period from 2002 to 2007, the fund has lagged the other top-quartile performers in the subsequent five year period.
The fund returned 83.95 per cent over the 10 year period, compared with a sector average of 56.98 per cent. The fund also outperformed over the five year term, but dropped into the third-quartile over three years.
Graph: Performance of the fund vs the sector and index over 10 yrs
Source: FE Analytics
The five-crown rated £174.9m BlackRock Corporate Bond fund
has also managed the accolade, delivering 77.62 per cent over 10 years.
The fund, managed by Simon Blundell
and Ben Edwards
, has outperformed over every period; however, Blundell has only been running the fund for the past year, joined by Edwards in May.
In spite of the fund’s consistent performance, it has undergone a series of management changes over the past decade, having been fund by Paul Shuttleworth, FE Alpha Manager Andrew Lake and Daniel McKernan over the past 10 years.
Causer and Read, who have been running the Invesco fund for more than 15 years, managed to deliver their consistent performance with the third highest Sharpe ratios in the sector, behind the Schroder All Maturities Corporate Bond and M&G Corporate Bond funds.
The ratio measures the fund’s return relative to a notional risk-free investment – in this case, cash. The difference in returns is then divided by the fund’s volatility.
The Invesco fund also delivered the highest level of Alpha in the sector over 10 years, at 2.71, nearly double the 1.15 Alpha level from BlackRock.
Both funds have a minimum investment of £500and annual management charges of 1 per cent. The BlackRock fund is slightly less expensive than the Invesco fund, with a TER of 1.08 per cent, compared with Invesco’s 1.19 per cent.
Richard Troue, analyst at Hargreaves Lansdown, says Causer and Read’s Invesco Corporate Bond fund was one of the favoured funds at the firm due to the consistent management team.
“The Invesco fund is one we like quite a lot,” he said.
“Paul Causer and Paul Read are experienced bond fund managers and have a history of making the right calls. You do need to take a long term view because they do have a history of being a bit early on some of their calls, but recently that has worked well for them.”
“It is worth pointing out they are very positive on bonds issued by banks, which some investors may consider higher risk, particularly because the issues in Europe are not yet resolved.”
The five-crown rated Fidelity Institutional UK Long Corporate Bond, headed by FE Alpha Manager Ian Fishwick, was the top-performing fund in the list over the most recent five year period; however, the fund is not available to retail investors in the UK.
The Schroder All Maturities Corporate Bond, Schroder Long Dated Corporate Bond and Newton Long Corporate Bond funds also have institutional minimum investment levels, making them too expensive for the majority of retail investors.