Following on from the Investment Association's recent launch of three new bond fund sectors, FE fundinfo analyst Harpreet Sajjan takes an in depth look at how the Sterling Corporate sector is performing. Investors face the difficult dilemma of increasing exposure to an asset class that is clearly outperforming equities in current market conditions, but facing the higher probability of seeing bonds default as even the biggest banks teeter on the brink of going bankrupt.

Schroders award-wining Multi-Manager Funds

In tough time trust a recognised performer. This year Schroders won the Citywire Team All Stars Awards for the overall category and managed asset class.

The three funds in the Schroder Multi-Manager range, are carefully designed for a specific type of investor. They will give you access to some of the best fund managers around. We aim to combine managers intelligently within well-balanced portfolios to produce optimum overall results.

Our funds provide broad diversification, across different types of assets and markets. Your clients can access great investment opportunities in equities, bonds, property and alternative asset classes in a single fund.

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up.

Bonds have come into the limelight as equity markets have deteriorated, with fund managers turning towards this asset class in their search for capital preservation. As the consensus remains for the bear market to continue its persistence in the foreseeable future, analyst Harpreet Sajjan expects bond funds to continue their prosperity well into 2009.

Volatility sparked by the past year's credit crunch-related events has contributed to investors seeing a big bite taken out of returns from collective investments. This may improve going forward, says analyst Martin Wood, not least because of factors such as a fall in the price of oil.

More importantly, however, using volatility as a guide to investment choices shows that those in the know could have had a pretty good year; in general those funds experiencing lower rates of volatility in the past 12 months are also those that have produced better returns.

One year ago the combination of diversification, alternative investment and active fund management strategies, was delivering positive returns, in spite of, and because of the onset of the credit crunch and shaky equity markets.

Today however, with more than 20 absolute return funds making a negative return or less than 6% over the past 12 months, the question arises, is it time to switch to another vehicle?