Royal London Sterling Extra Yield Bond - why the improvement?

aroominyork

Could anyone (not really looking at you, bowlhead) explain why this strategic bond has shot ahead of its benchmark since summer 2016? https://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=RPF65&univ=O Is it, for example, increased investment in long-term bonds which might not serve it well when interest rates increase?

As a rider, how do I know for sure if a fund is a strategic bond fund which, if I understand correctly, gives the fund manager greater flexibility to respond to changing market and macro conditions? This Royal London, for example, is not titled a strategic bond fund but I read it described as so. Similarly M&G Optimal Income.

Audaxer

I've also been looking at that fund and it surprised me that it dropped about 45% in 2008 - I thought being a bond fund the equity crash had much less of an impact on bonds, but it appears not with that fund. The 10 year return without income reinvested is -11.6%. I was therefore surprised it has a 5 star Morningstar rating.

aroominyork

Good point, Audaxer - a huge fall in 2008 http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/r/royal-london-sterling-extra-yield-bond-class-y-income/research which all the more means I need some insight into its strategy. It does look like it overperforms in rising markets and underperforms in falling markets.

Thrugelmir

Pure conjecture. There is a sizeable holding in Co-Op bank. Bonds have increased in value on back of recent news.

In addition BOE has been operating a Corporate Bond buying programme which will have influenced prices higher.

Which may explain more recent movement a little.

sorcerer

Another possible option is the effects of Brexit, investors might be going more defensive and into less risky bonds, and staying away from UK equities.