Launched in May 1995 the Fund aims achieve a high income through investing primarily in a variety of investment grade fixed interest instruments without geographical restriction and preference shares in UK and European community companies.

The fund

  • Targets high income.

  • Invests across a wide range of investment-grade bonds, including many household names.

  • Seeks to balance credit, interest rate and liquidity risks judiciously.

Meet the Sanlam Fixed Interest Team

Peter Doherty
Peter Doherty
Head of Fixed Income
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Guillaume Desqueyroux
Guillaume Desqueyroux
Fund Manager
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Darren Reece
Darren Reece
Fund Manager
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Thomas Wells
Thomas Wells
Fund Manager
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Chris Turdean
Chris Turdean
Investment Analyst
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Why invest in the fund?

  • Core corporate bond fund - can either be a standalone corporate credit investment or the credit component of a wider portfolio
  • Expertise in financials – a key segment of the corporate bond market
  • Active duration management – credit is a long duration asset class and thus sensitive to changes in risk-free rates
  • Good access to the primary market
  • Sophisticated management of risk and ESG factors

Our fund offers exposure to a range of good quality (investment-grade) corporate bond issuers. As such, the fund can be used as a core corporate credit allocation, either on a standalone basis or as part of a diversified portfolio.

Within the fund we will seek to outperform the wider sterling corporate credit sector through judicious management of interest rate, industry, credit and liquidity risks.

We are experts in financials sector (c.40% of the credit market) and we are part of the broader ecosystem of corporate credit, which means we have excellent access to the primary market and new issues. The primary market is an important source of new ideas for the fund.

Environmental, Social and Governance

Whilst the fund is not marketed as an “ESG” or “sustainable” bond fund, it is managed with ESG considerations as we believe this enables us to maintain our performance whilst improving the average integrity of our portfolio companies.

As part of our ESG strategy we:

  1. Watch list certain industries which screen negatively but where we have flexibility to allocate on a comparative basis
  2. Allocate capital to firms that are doing the right things by ensuring their business are sustainable
  3. Engage regularly with firms in our universe, which enables a deeper and more valuable understanding of our investment environment
  4. Operate on a transparent basis, recognising the impact that our choices can have on society, the environment and communities.

We have excellent access to the primary market and new issues.

Darren Reece, Fund Manager

Fund Commentary

September 2021

Market/macro backdrop
Interest rate volatility created a healthy re-pricing of credit risk during the month and the tone remained weak heading into the final days of trading. In the UK, hawkish comments from the Bank of England led to speculation that interest rates could rise early next year, and importantly the Bank made it very clear that any tightening would be implemented through an increase in Bank Rate, even if that meant raising rates before the end of the current asset purchase programme.

 
Performance
The Fund produced a performance of -0.9% in September (source: Morningstar – A Inc units).

For comparison, the IA £ Corporate Bond sector median produced a performance of -1.80%.


Past performance is not a guide to future performance. Total return, NAV to NAV basis, net of charges.



Positive and negative contributors
The general positive contributor in comparison to the peer group was our shorter duration stance as longer-dated yields sold off aggressively in the second half of the month; to give some context here, the 10y gilt yield started the month at just 0.62% but had soared to 1.02% by the month end.

The broad allocation to credit, and in particular our exposure to financials, produced a satisfactory outcome for the Fund given that credit risk overall re-priced during the month.


Significant portfolio changes - buy/sells
In the primary market, we participated in Investec’s Tier 2 issue. Outside of financials, we bought some of Ford’s 3.683% December 2024 bond. In terms of sales activity, we took profits in AA.


Fund/corporate/team highlights
We are pleased to report that the Sanlam Credit Fund, which is managed by the same team that manages the SVS Sanlam Fixed Interest Fund, has achieved a 5* Morningstar rating.


Outlook
Our recent monthly reports have regularly noted the risk of interest rate volatility caused by ‘transitionary’ inflationary expectations. Recent inflation prints have surprised to the upside however, and so central banks’ credibility will likely be tested in Q4 as they will need to navigate the prospect of a slowing macro environment and above-target inflation.
 
Valuations in the corporate bond market remain stretched, although the government bond sell-off has at the very least contributed to a more attractive entry level for investors who have kept some powder dry. Overall, technicals of the European corporate bond market remains solid, and should offset, at least partly, the negative impact from higher rates and economic slowdown concerns. Nonetheless, investors should note the caution within the investment team as we enter the final quarter of the year.
 

Coming soon
Explore the details
A high-conviction portfolio investing in corporate credit. Typically, at least 80% of the Fund will be invested in investment-grade bonds with any non-GBP-denominated bonds hedged to sterling.

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Fund Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. A table with five years’ performance is available in the fund factsheets.

The Fund invests in bonds. Investment in bonds and other debt instruments is subject to interest rate risk and credit ratings. The government or company issuer of a bond might not be able to repay either the interest or the original loan amount and therefore default on the debt. This would affect the credit rating of the bond and, in turn, the value of the Fund.  If long-term interest rates rise, the value of your shares is likely to fall. Exchange rate changes may cause the value of investments to go down as well as up.

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The value of investments and any income from them can fall and you may get back less than you invested.