The fund aims to provide a combination of capital growth and income to deliver a return that is higher than that of the short-dated investment grade corporate bond market over any five-year period.
Investment policy and strategy
Core investment: At least 80% of the fund is invested in investment grade bonds issued by companies from anywhere in the world and asset-backed securities. The fund typically holds bonds which have short repayment dates and, as a result, it has a low portfolio duration. (Duration is a measure of a bond’s/bond fund’s sensitivity to changes in interest rates; a bond fund with low duration is less sensitive to changes in interest rates than funds with longer or higher duration.)
Other investment: The fund also invests in bonds issued by companies with a longer time to repayment, and uses derivatives to reduce their sensitivity to interest rate movements. The fund also holds cash or assets that can be quickly turned into cash.
Use of derivatives: The fund typically invests directly, but may also invest indirectly via derivatives. Derivatives may also be used to manage risks and reduce costs, as well as to offset the impact of currency exposures arising from the fund’s non-euro investments.
For more information on the types of bonds held and derivatives used, please refer to the Prospectus.
Strategy in brief: The bonds held in the fund are generally issues due to be repaid within a short period so as to minimise the effect of interest rate movements on the fund’s value. Asset allocation and stock selection are at the heart of the fund’s investment process. The fund manager has the flexibility to spread the portfolio across issuers, sectors and countries, supported by in-depth research by an in-house team of analysts.
Performance comparator: The fund is actively managed. The iBoxx EUR Corporates 1-3 year 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.
Investment grade bonds: Bonds with a medium or high credit rating from a recognised credit rating agency are considered to be at lower risk from default than bonds with lower credit ratings.
Risks associated with the fund
The value and income from the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise. There is no guarantee that the fund will achieve its objective and you may get back less than you originally invested.
Investments in bonds are affected by interest rates, inflation and credit ratings. It is possible that bond issuers will not pay interest or return the capital. All of these events can reduce the value of bonds held by the fund.
The fund may use derivatives to profit from an expected rise or fall in the value of an asset. Should the asset's value vary in an unexpected way, the fund may lose as much as or more than the amount invested.
The fund is exposed to different currencies. Derivatives are used to minimise, but may not always eliminate, the impact of movements in currency exchange rates.
The hedging process seeks to minimise, but cannot eliminate, the effect of movements in exchange rates on the performance of the hedged share class. Hedging also limits the ability to gain from favourable movements in exchange rates.
In exceptional circumstances where assets cannot be fairly valued, or have to be sold at a large discount to raise cash, we may temporarily suspend the fund in the best interest of all investors.
The fund could lose money if a counterparty with which it does business becomes unwilling or unable to repay money owed to the fund.
Further details of the risks that apply to the fund can be found in the fund's Prospectus.
The Fund allows for the extensive use of derivatives.