Bond funds query

masonic

aroominyork said:

wmb194 said:

It depends on the bonds. Lower rated corporate bonds e.g., lower grade investment bonds - 'BBB' credit rating - and high yield/junk bonds - 'BB' and below - have higher yields and tend to trade more like equities so can sell-off hard in a nervous market and can rally strongly if the worries turn out to be overblown. Geographies matter, too. Emerging market bonds, corporate and government, will usually trade at higher yields and with more volatility than developed market bonds.

That's a point worth making. OP began the thread about (mostly) corporate bonds and, because of the implications on gilts of the govt's recent actions, the discussion veered off in that direction.

To understand what's happening to higher risk bonds, it's necessary to first understand the drivers of 'risk free' government bonds. This feeds in to corporate bonds, which will have the additional variable of a credit spread above the risk free rate, which is the risk premium demanded for taking on default risk.

With corporate bonds, you have the twin risks of interest rate sensitivity and default risk driving prices downwards and yields upward. Price movements have largely been driven by the former to date, but as we head into recession with interest rates stabilising, the latter may pick up the reigns.

Aged

After much deliberation and hand-wringing, I decided that I couldn't live with the uncertainty re the two bond funds so I have sold them. My pension account is now sitting at approx 50% in cash which it looks like I'll need to either a) reinvest or b) remove from the wrapper in order to earn more interest on it. I don't have a clue re where to reinvest at this time, although I feel that it may be a good time in general with everything being 'down'. Any pointers would be most gratefully received. 

Beddie

Aged said:

After much deliberation and hand-wringing, I decided that I couldn't live with the uncertainty re the two bond funds so I have sold them. My pension account is now sitting at approx 50% in cash which it looks like I'll need to either a) reinvest or b) remove from the wrapper in order to earn more interest on it. I don't have a clue re where to reinvest at this time, although I feel that it may be a good time in general with everything being 'down'. Any pointers would be most gratefully received. 

One option is "wealth preservation" funds, which try to achieve positive (but lower) growth in all conditions. Yes, they contain bonds, as part of their mix of investments, but will not behave like the funds you've just sold.
Here's a couple of examples:

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/c/cg-absolute-return-income
https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/l/lf-ruffer-total-return-class-c-accumulation

You won't get rich quick with these, but shouldn't see big falls either.

Aged

Beddie said:

Aged said:

After much deliberation and hand-wringing, I decided that I couldn't live with the uncertainty re the two bond funds so I have sold them. My pension account is now sitting at approx 50% in cash which it looks like I'll need to either a) reinvest or b) remove from the wrapper in order to earn more interest on it. I don't have a clue re where to reinvest at this time, although I feel that it may be a good time in general with everything being 'down'. Any pointers would be most gratefully received. 

One option is "wealth preservation" funds, which try to achieve positive (but lower) growth in all conditions. Yes, they contain bonds, as part of their mix of investments, but will not behave like the funds you've just sold.
Here's a couple of examples:

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/c/cg-absolute-return-income
https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/l/lf-ruffer-total-return-class-c-accumulation

You won't get rich quick with these, but shouldn't see big falls either.

I have been considering wealth preservation funds for quite some time. I note that the first example you mention is by the same company as the Capital Gearing Trust fund. This may seem like a silly question, but why would you invest into this absolute return fund rather than the trust ie what exactly is the difference between them?

masonic

Aged said:

Beddie said:

Aged said:

After much deliberation and hand-wringing, I decided that I couldn't live with the uncertainty re the two bond funds so I have sold them. My pension account is now sitting at approx 50% in cash which it looks like I'll need to either a) reinvest or b) remove from the wrapper in order to earn more interest on it. I don't have a clue re where to reinvest at this time, although I feel that it may be a good time in general with everything being 'down'. Any pointers would be most gratefully received. 

One option is "wealth preservation" funds, which try to achieve positive (but lower) growth in all conditions. Yes, they contain bonds, as part of their mix of investments, but will not behave like the funds you've just sold.
Here's a couple of examples:

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/c/cg-absolute-return-income
https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/l/lf-ruffer-total-return-class-c-accumulation

You won't get rich quick with these, but shouldn't see big falls either.

I have been considering wealth preservation funds for quite some time. I note that the first example you mention is by the same company as the Capital Gearing Trust fund. This may seem like a silly question, but why would you invest into this absolute return fund rather than the trust ie what exactly is the difference between them?

Capital Gearing Trust is an investment trust, so it is run as a company rather than a fund. There are a number of differences between investment trusts and open ended funds, probably best to link to a guide rather than rehash the differences here: https://morningstar.co.uk/uk/news/134154/key-differences-between-investment-trusts-and-funds.aspx

Ruffer also runs an Investment Trust.

Aged

masonic said:

Capital Gearing Trust is an investment trust, so it is run as a company rather than a fund. There are a number of differences between investment trusts and open ended funds, probably best to link to a guide rather than rehash the differences here: https://morningstar.co.uk/uk/news/134154/key-differences-between-investment-trusts-and-funds.aspx

Ruffer also runs an Investment Trust.

Thanks for that. I don't have any trusts in my portfolio so far so I don't know much about them. I understand that trusts are bought and sold, and behave more, like shares so eg they incur stamp duty and would pay out dividends rather than reinvesting in themselves like in an accumulation fund. I imagine that might make them more suited to a pension that was in drawdown. Anything else apart from that which would mean someone would choose one over the other?

masonic

Yes, there is stamp duty (and bid/offer spread), so you would want a long holding period to negate that. Dividend reinvestment is not normally an issue, but you are right that there are dividends to contend with. It's really the ability to trade at a premium/discount, fixed capital pool, and gearing that make them interesting.

Beddie

Aged said:

Beddie said:

Aged said:

After much deliberation and hand-wringing, I decided that I couldn't live with the uncertainty re the two bond funds so I have sold them. My pension account is now sitting at approx 50% in cash which it looks like I'll need to either a) reinvest or b) remove from the wrapper in order to earn more interest on it. I don't have a clue re where to reinvest at this time, although I feel that it may be a good time in general with everything being 'down'. Any pointers would be most gratefully received. 

One option is "wealth preservation" funds, which try to achieve positive (but lower) growth in all conditions. Yes, they contain bonds, as part of their mix of investments, but will not behave like the funds you've just sold.
Here's a couple of examples:

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/c/cg-absolute-return-income
https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/l/lf-ruffer-total-return-class-c-accumulation

You won't get rich quick with these, but shouldn't see big falls either.

I have been considering wealth preservation funds for quite some time. I note that the first example you mention is by the same company as the Capital Gearing Trust fund. This may seem like a silly question, but why would you invest into this absolute return fund rather than the trust ie what exactly is the difference between them?

I mentioned the funds, but yes the investment trusts are perfectly good alternatives too! I'm not able to say one is better than the other, just different.  The costs can be different, as Masonic states above, also the platform charges can be better for investment trusts with some providers e.g. Hargreaves Lansdown who have an annual cap. But I am more used to funds and they work for me.

Good luck with whatever you decide to do