The fund aims to provide a combination of capital growth and income to deliver a return that is higher than that of the global bond market over any five year period.
Investment policy and strategy
Core investment: At least 80% of the fund is invested in bonds, including investment grade bonds, high yield bonds, unrated bonds and asset-backed securities. These bonds may be issued by governments and their agencies, public authorities, quasi-sovereigns, supranational bodies and companies. Issuers of these bonds may be located in any country, including emerging markets*, and denominated in any currency.
Other investments: The fund can also invest in any currency, and cash or assets that can be turned quickly into cash.
Use of derivatives: Derivatives may be used to invest indirectly in bonds. Derivatives may also be used to manage risks and reduce costs, as well as to offset the impact of changes in currency exchange rates on the fund’s investments.
For more information on the types of bonds held and derivatives used, please refer to the Prospectus.
* Emerging market countries are defined as those included within the MSCI Emerging Markets Index and/or those included in the World Bank’s definition of developing economies, as updated from time to time.
Strategy in brief: The fund is a flexible global bond fund. The investment manager selects investments based on an assessment of macroeconomic factors such as economic growth, interest rates and inflation.
This analysis determines which areas of the global bond markets the investment manager believes the fund should invest in to achieve its objective. It also influences the subsequent selection of individual bond holdings, as well as the fund’s currency exposures. The investment manager is assisted in the selection of individual bonds by the deputy manager and an in-house team of analysts.
Performance comparator: The fund is actively managed. The Bloomberg Barclays Global Aggregate Index is a point of reference against which the performance of the fund may be measured.
Asset-backed securities: Bonds backed by assets that produce cashflows, such as mortgage loans, credit card receivables and auto loans.
Bonds: Loans to governments and companies that pay interest.
Derivatives: Financial contracts whose value is derived from other assets.
High yield bonds: Bonds issued by companies considered to be riskier and therefore generally paying a higher level of interest.
Investment grade bonds: Bonds with a medium or high credit rating from a recognised credit rating agency. They are considered to be at lower risk from default than bonds with lower credit ratings.
Risks associated with the fund
The value of investments and the income from them will rise and fall. This will cause the fund price, as well as any income paid by the fund, to fall as well as rise. There is no guarantee the fund will achieve its objective, and you may not get back the amount you originally invested.
Changes in currency exchange rates will affect the value of your investment.
The fund may use derivatives in a limited way to gain exposure to investments exceeding the value of the fund (leverage). This may cause greater changes in the fund’s price and increase the risk of loss.
The fund may use derivatives with the aim of profiting from a rise or a fall in the value of an asset (for example, a company’s bonds). However, if the asset’s value varies in a different manner, the fund may incur a loss.
The fund manager may use derivatives with the aim of producing a capital gain if interest rates rise (normally, if interest rates rise, the capital value of fixed income securities will fall). However, if interest rates fall, the fund may incur a loss.
The value of the fund may fall if the issuer of a fixed income security held is unable to pay income payments or repay its debt (known as a default).
The fund will invest in emerging markets which are generally smaller, more sensitive to economic and political factors, and where investments are less easily bought and sold. In exceptional circumstances, the fund may encounter difficulties when selling or collecting income from these investments, which could cause the fund to incur a loss. In extreme circumstances, it could lead to the temporary suspension of dealing in shares in the fund.
If the share class is hedged (H share class), it aims to mirror the performance of another share class. We cannot guarantee that the hedging objective will be achieved. The hedging strategy will limit holders of the hedged share class from benefiting if the hedged share class currency falls against the US dollar.
Where market conditions make it hard to sell the fund’s investments at a fair price to meet customers’ sale requests, we may temporarily suspend dealing in the fund’s shares.
Some transactions the fund makes, such as placing cash on deposit, require the use of other financial institutions (for example, banks). If one of these institutions defaults on their obligations or becomes insolvent, the fund may incur a loss.
The fund may invest more than 35% in securities issued by any one or more of the governments listed in the fund prospectus. Such exposure may be combined with the use of derivatives in pursuit of the fund objective. It is currently envisaged that the fund’s exposure to such securities may exceed 35% in the governments of Germany, Japan, UK, USA although these may vary subject only to those listed in the prospectus.
The Fund allows for the extensive use of derivatives.