Corporate Bonds?

thelawnet

Primrose wrote: »

I was going to ask the same question as runcible - i.e. is there a specific website which lists all the main organisations in which Corporate Bond Funds invest? I know the Funds Research section on the Hargreaves Lansdown website offers some information but normally only lists the biggest companies in which any fund has a holding..

Check the fund managers' websites, there'll usually be a PDF listing the bond holdings of their funds. Googling for the individual fund names also works.

thelawnet

runciblespoon wrote: »

I've done some digging and found a bit of data. Picking a random fund:
http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?tab=3&id=F000000732
Shows me the split of credit rating (AAA-BB and some 'not rated'), and the spread of maturities.
And the front page tells me the yield:
http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?tab=0&id=F000000732

('tax year return' of 1.0% - does that mean it's projected to return 1% between now and 5th April, 1% in 2009-10, or 1% over the next 12 months? This one gives a 12 month yield of 6% and a tax year return of 1% which would suggest the first)

The return refers to either the change in value or the change in value plus the yield. It will be historical.

I don't think it's particularly useful.

I would look at yield first and foremost. Higher yield means higher risk, but also possibly better value because higher risk bonds may be oversold, so that a fund returning 8% might give not only very good income but capital gains as well.

Of course lower yield means lower volatility, and this is where the previous year's performance is relevant.

If you look here:

http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=V7F53&univ=U&pagetype=overview

you'll see this fund is pretty much mindlessly following its benchmark (Sterling Corporate Bond). It's not adding value. There's nothing particularly wrong with that, but if you can find a cheaper fund doing the same thing you might as well go with that one.

A fund with high yield and low historical volatility is a very good buy given the recent conditions (although of course the manager could have recently bought high-risk assets so the future could be more volatile, but even this reflects good judgement at avoiding the turmoil of the last months).

Are these returns before or after annual fees? Is there a particular reason many funds are only giving 'tax year returns' (all of 1%) - because they haven't a clue what's going to happen in the coming year?

No idea. I wouldn't pay it any attention. Look at yield and past performance.

But how do I find out face value of a particular fund? If I want to know how at much discount/premium the fund is trading, I can look at the current price. But I would need to know the face value first. Or does anyone tabulate discount/premium figures?

Unit Trusts and OEICs are sold at NAV (well actually in the case of UTs they are sold at the buy price of the underlying assets + initial fee, and for OEICs they are sold at mid price + initial fee). If you want to buy things at a discount you need to look at Investment Trusts.

Otherwise you can rest assured that because UTs/OEICs are not traded like ITs are, they will not sell at a discount or premium.

If an IT sector is out of favour than of course that means a discount and a potentially even bigger bargain.

tradetime

How would you go about gauging whether a bond fund like this
http://uk.ishares.com/fund/fund_overview.do?fundId=157495
is fairly valued or not, am not so much interested in whether this one is or not, but rather how do you work out whether it is or not.

annamaze

expounder wrote: »

I have three maxi isas in norwich union [now arriva] in higher income corporate bonds purchased in 2000. total inevstment £21.000. The value of these bonds have dropped by over 25% and I am at a loss what to do. Whether to withdraw all now and cut my losses, leave them in and hope they will recover within the near future.I am still receiving the original monthly figure in income even though the value has decreased.

As they have devalued so much in such a short space of time [within eight months] they could drop futher. I joined without employing a financial adviser [mistake] as I think the commission he/she would have received is being deducted anyway.

Anyone with any expertise out there with possible pointers or in the same boat.?

I am retired, and 80 years of age which could be a factor in what decision I make.

I have also lost a substantial amount of money from Norwich Union Bonds. I did have a financial advisor who recommended this type of investment. I have recently tried to get out what is left of my money before it dwindles away to zero but without success. Norwich Union has deferred payment for 6 months and could decide to defer for a further 6 months after. This decision has been effective since 29.01.09. Are they allowed to do this? I am also a pensioner who cannot afford to lose this money.

Primrose

annamaze - I suspect that the bonds you have with Norwich Union are With Profit Bonds rather than the Corporate type of bonds which are available through Fund Managers such as Invesco Perpetual, Jupiter, etc. The latter can be sold at any time, whereas the former can have penalties imposed of them at any time to prevent too many people withdrawing their money. I believe that quite a lot of With Profit bond providers have been re-imposing penalties recently because of the falling stock market and there's very little you can do about it - either staying in and hoping the penalties will eventually be removed when the stock market improves, or withdrawing your money and taking the loss. Although I do currently hold some With Profit bonds I would never buy them again because of their lack of transparency in terms of never knowing when penalties will be imposed.

turbobob

Funds in illiquid assets like real 'bricks and mortar' property can defer payments at certain times.

The "penalties" on with profit funds (Market Value Reductions) are something different. They aren't really penalties, though people seem to see them like this. If you invested in a normal fund which invested in the same asset mix as a with profit fund, your investment would go up and down daily. With profit "smoothes" some of this. This IMO only really works in relatively stable markets unlike what we've had recently. Quite simply you can't smooth a 20% fall in the value of a fund so this is why big MVRs are being applied at the moment. If they weren't applied people cashing in are disadvantaging the people remaining in the fund.

Just to add some policies have contractual exit points where an MVR won't be applied - usually death, or maturity of an endowment or pension, or some fixed anniversary from the start date.

turbobob

tradetime wrote: »

How would you go about gauging whether a bond fund like this
http://uk.ishares.com/fund/fund_overview.do?fundId=157495
is fairly valued or not, am not so much interested in whether this one is or not, but rather how do you work out whether it is or not.

I don't know the answer. I was wondering if you are asking if its fairly priced as in whether the NAV of the fund is correct, or some other indicator of value?

tradetime

turbobob wrote: »

I don't know the answer. I was wondering if you are asking if its fairly priced as in whether the NAV of the fund is correct, or some other indicator of value?

Thanks for the reply turbobob, no not the NAV, it's a little above NAV at current price. What I'm interested in is, if I was in the market for a fund like this (and fair disclosure I may well be at some point in the next couple of months as I don't have any corporate bond exposure at the moment, and thinking along with other bonds it might be useful) How do I judge whether it is for want of a cliche, a buy, sell or hold at the moment. Since I have never touched bonds I have no comparitive experiences in looking at these products.

dunstonh

I have also lost a substantial amount of money from Norwich Union Bonds. I did have a financial advisor who recommended this type of investment. I have recently tried to get out what is left of my money before it dwindles away to zero but without success. Norwich Union has deferred payment for 6 months and could decide to defer for a further 6 months after. This decision has been effective since 29.01.09. Are they allowed to do this? I am also a pensioner who cannot afford to lose this money

You have a norwich union investment bond. Not a corporate bond. Its not the same thing.

The NU bond has around 300 funds ranging from cash, fixed interest, with profits, property and equities across the range and various fund houses. You dont need to encash the product to change your investments.

It sounds like you have the property fund as that is the only fund in their range with a 6 month deferment. Yes they are allowed to do it as its not made up of liquid assets. Its made up of property and you have to allow for them to sell properties to pay redemptions.

cloud_dog

I would also be interested in any information offered regarding tradetimes enquiry.

I am probably in a similar situation to TT and have started to to place small amounts into a few corporate bond funds, previously having no exposure.

Is the valuation aspect difficult insofar as the valuation is a reflection of future economics, i.e. we will only really know if/when bonds were fairly priced after evidence shows the economy (and therefore the issuing companies) to be over the worst????

Thanks cloud_dog