Corporate Bonds

purch

you have the option of holding to maturity

Yes

But the majority of readers of this Forum, will like the OP be looking at investing through a Fund, which doesn't have a maturity.

A lot of the Low Risk inherent with a Bond is lost due to loss of maturity.

A Corporate Bond Fund is never as low risk as they are often labelled.

dunstonh

A Corporate Bond Fund is never as low risk as they are often labelled.

I think its more a case that there is an assumption that fixed interest funds are low risk whereas in reality the risk varies across the funds and you cannot assume that just because its a fixed interest fund it will be a low risk one. There are low risk versions and there are actually some pretty high risk versions.

sdooley

If you invest through a fund the fund manager has the option (depending on its mandate) of holding bonds which become distressed to maturity. The problem here with an open-ended fund is from redemptions, which can force sales and further depress values.

LongTermLurker

sdooley wrote: »

If you invest through a fund the fund manager has the option (depending on its mandate) of holding bonds which become distressed to maturity. The problem here with an open-ended fund is from redemptions, which can force sales and further depress values.

OK, another way of saying it is "in a fund you have no control over whether a bond is held to maturity". If the fund manager sells and takes a loss, you make a proportionate loss.

millpond_2

I retired two weeks ago and went to see our local Halifax Financial Adviser, (I realise now it should have been an Independent FA).
This has not happened yet, but he advised us to put £60K in Halifax Corporate Bonds, showed us the graphs etc. and more or less convinced us that this is the way forward. - ADVICE, PLEASE.

Ranger8

millpond wrote: »

I retired two weeks ago and went to see our local Halifax Financial Adviser, (I realise now it should have been an Independent FA).
This has not happened yet, but he advised us to put £60K in Halifax Corporate Bonds, showed us the graphs etc. and more or less convinced us that this is the way forward. - ADVICE, PLEASE.

Did the Halifax FA give millpond bad advice ? :undecided

Ranger8

Ranger8 wrote: »

Did the Halifax FA give millpond bad advice ? :undecided

Is this a bad question ?

caveat_emptor

Ranger8 wrote: »

Is this a bad question ?

No, just impossible to answer as it depends on future performance. But asking Halifax advisor was not a good place to start.

StevieJ

Ranger8 wrote: »

Is this a bad question ?

Depends what the yield is, I shouldn't think they will go bust. Does anyone know if they can default without going bust? The following article comments on Corporate bonds in general.

Just wondering if he meant Halifax corporate bond fund or Halifax Bonds (i.e. their own issued bonds).

yesterday Lex comments in the FT. For info.
Corporate bonds

Published: November 19 2008 09:21 | Last updated: November 19 2008 19:55

It may be technical, it may be an abnormality. But it is a gift horse nonetheless. Corporate bonds are trading more cheaply than credit default swaps. That means investors can buy a bond and then receive a coupon that more than pays for the cost of insuring that bond against default. This is close to free money.
Normally, CDS spreads trade wider than cash bond spreads. First, because investors short credit by buying default protection; that pushes CDS spreads wider. Second, corporate bonds are typically viewed as attractive to hold because they can be used as collateral for funding. That narrows spreads on cash bonds.

earlgrey_3

Ranger8 wrote: »

Did the Halifax FA give millpond bad advice ? :undecided

Would be interested to see the graph Millpond was shown by the Halifax rep. The Halifax Corporate Bond fund has lost 16.4% over the last year, lost 16.6% over the last 3 years and lost 4.4% over the last 5 years. Maybe it was upside down

Figures for the average fixed interest UT are shown as -8.9% -7.8% and +3.7% over the same periods.

Ref:http://www.trustnet.com/ut/funds/perf.aspx?txtSearch=&btnSubmit=Search...&universe=ut&btnGo=%3CSPAN+class%3DbuttonLeft%3E%3CSPAN+class%3DbuttonRight%3EGo%3C%2FSPAN%3E%3C%2FSPAN%3E&nsUniverse=UT&sort=5&ss=0&columns=&view=price&page=0&booIMA=0&reg1=all&sec=fin&ima=all&unit=all&type=all