The fund aims to provide income and capital growth.
Investment policy and strategy
Core investment: At least 70% of the fund is invested in investment grade (high-quality) bonds issued by governments, or are guaranteed by governments, from anywhere in the world.
Other investments: The fund also invests in bonds with a lower credit rating than investment grade issued by governments, or are guaranteed by governments. In addition, it may hold cash or assets that can be turned into cash quickly.
Use of derivatives: Derivatives may be used to invest indirectly in bonds, to reduce risks and costs and to manage the impact of changes in currency exchange rates on the fund’s investments.
Strategy in brief: The fund manager selects investments based on an assessment of macroeconomic factors such as economic growth, interest rates and inflation. This analysis determines the individual government bonds from different countries in which the manager believes the fund should invest in order to achieve its objective. It also influences the currencies to which the fund will be exposed. The manager is assisted in the selection of individual government bonds by the deputy fund manager and an in-house team of analysts. The fund is diversified by investing in a range of government bonds from across the globe.
Bonds: Loans to governments and companies that pay interest.
Derivatives: Financial contracts whose value is derived from other assets.
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 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.
When interest rates rise, the value of the fund is likely to fall.
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.
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.