Giant bond funds managed by Artemis, Fidelity and Rathbones are among those that professional investors are researching more than expected given their size, FE Trustnet analysis shows. 
As we’ve noted in a previous article, much of the research that takes place on FE Analytics – a fund analysis tool used by thousands of financial advisers, wealth managers, paraplanners and other professional fund pickers – goes into the largest funds in the Investment Association universe.
Having examined the equity sectors, FE Trustnet now finds out which large fixed income funds are attracting even more research than their size would suggest.
To do this, we calculated the average number of research hits that £1m in AUM brought into each of the Investment Association’s bond sectors over the past 12 months then filtered for funds with assets of more than £1bn and a hit ratio higher than this.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The giant fixed income fund that is getting even more research than its size would suggest is Artemis Strategic Bond. Funds in the IA Sterling Strategic Bond sector receive an average 4.3 research interactions per £1m in AUM but this £1.5bn fund gets 17.5 – some four times higher than the average.
Managed by James Foster and Alex Ralph, the four FE Crown-rated fund is in the sector’s top quartile over the past three years while its 138.58 per cent 10-year return is significantly higher than the gain made by its average peer and its Markit iBoxx GBP Non-Gilts benchmark.
The FE Invest team, which has Artemis Strategic Bond on its Approved List, said: “This is a relatively aggressive strategic bond fund and could suit those who are prepared to take a little more risk in pursuit of yield or total return. The fund has a strong track record of outperforming when credit conditions improve, which means it should especially suit those who see the economy as improving.”
NB Emerging Market Debt Hard Currency appears in second place in this study. It has assets under management of £1.2bn and received around 6.7 research views per £1m; this is 3.46 times higher than the average for the IA Global Emerging Markets Bond sector.
The fund has a strong track record and is currently top-quartile over one, three and five years. It has made a 26.02 per cent total return over the past five years, which is impressive considering that its average peer has posted a 0.63 per cent loss.
Headed up by Rob Drijkoningen with FE Alpha Manager Bart van der Made and Gorky Urquieta as deputies, the fund focuses on bottom-up country selection with the largest weightings at present being to Turkey, Argentina and Mexico. Factors such as duration positioning and corporate allocation take a secondary role in the process.
Source: FE Analytics
In third place is another IA Sterling Strategic Bond fund managed by Artemis’ Alex Ralph: Artemis High Income. This £1.2bn fund has 14.8 FE Analytics research interactions per £1m in AUM, which is 3.45 times higher than the average for its peer group.
Square Mile Investment Consulting & Research, which gives the fund an ‘A’ rating, said: “Given its focus on yield, the fund is likely to have a relatively aggressive return profile, tending to outperform in times of strong corporate bond returns, but lag when corporate bonds are falling.
“This profile has the potential to result in considerable capital volatility at times, although we believe that, over longer time periods, this more aggressive approach will produce a good outcome for investors. The fund may be suitable for investors who wish to access a relatively high income stream and are prepared to tolerate a degree of capital volatility over the short to medium term in order to achieve it.”
Fidelity Strategic Bond is next, with 13 research hits per £1m in AUM – 3.03 times higher than the average IA Sterling Strategic Bond fund. For the bulk of its track record, the fund was run by fixed income veteran Ian Spreadbury but Claudio Ferrarese and Timothy Foster took over at the start of 2019 when Spreadbury retired after a 40-year career.
Rounding out the top five is Bryn Jones’ £1.3bn Rathbone Ethical Bond. Its 20.6 research interactions for each £1m in AUM is 3.02 times higher than the average for the IA Sterling Corporate Bond sector.
“Jones strongly believes that he can improve society through selective debt financing and, over its history, the fund has invested in many educational and social housing programmes,” FE Invest said. “The impact of the ethical screening on bond selection has been positive on the fund’s performance.”
Source: FE Analytics
When we consider the giant bond funds that are being researched less on FE Analytics than their size would suggest, the list is topped by Pimco GIS Income.
This fund is one of the largest in the Investment Association universe with assets under management of £46.6bn. However, it has received just 0.03 research hits per £1m, compared with 4.3 for the average IA Sterling Strategic Bond members.
Like many of the funds included on the above list, this is largely down to the fact that the bulk of its assets are held by non-UK investors and the fund is therefore being researched less frequently by those based in the UK.