ASSET MANAGEMENT
MARKET LEADERS IN
FIXED INTEREST
INVESTMENT
A MARKET LEADING
APPROACH
Royal London Asset Management has a highly
experienced fixed interest team that has developed
a reputation as one of the UK’s leading managers of
government and credit bonds and has delivered strong
performance through changing economic conditions
and business cycles. Our success is based on a deep
understanding of our clients’ investment objectives and
the use of our in-depth market knowledge to exploit
investment opportunities that help us meet these aims.
The experience and skill of our fund management team
sets us apart and gives us an edge in a highly competitive
market. We add value by using our experience and
exploring parts of the market that others overlook.
Our product range includes a wide variety of strategies
covering government bonds, investment grade credit
and high yield. These strategies can be accessed through
our pooled fund range and as segregated portfolios. We
are also able to offer bespoke solutions covering buy &
maintain credit and Liability Driven Investment.
Delivering outstanding and consistent performance
The combination of a high quality team and a robust,
repeatable investment process has enabled us to deliver
consistent and outstanding performance in both pooled
and segregated fixed interest portfolios during a wide
variety of economic and market conditions. Across the
fixed interest spectrum, many of our funds and mandates
have outperformed their benchmarks over shorter and
longer-term time periods. Our many industry awards are
further testament to the strength of our proposition.
We add value through actively managing asset allocation
as well as through stock selection within government and
credit bonds.
Established philosophies for government bonds
and credit
Although we believe that government bond markets
are relatively efficient, as active fund managers we are
nonetheless able to take advantage of valuation anomalies
as they occur, particularly in light of the unprecedented
conditions that have resulted from Quantitative Easing.
We look widely for government bond opportunities
and within sterling portfolios we make active use
of global bonds (with currency hedging). We target
multiple sources of outperformance, such as yield curve
positioning, duration management and stock selection,
and our robust process has enabled us to add value in a
wide variety of economic and market situations.
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Our strategy includes funds investing in conventional and
index-linked UK and overseas government bonds,
as well as bespoke LDI solutions, and covers traditional
‘long only’ and absolute return approaches.
Our approach to managing government bonds
Global
Bonds
Yield
Curve
Stock
Selection
Strategic
Diversified
Sources of
Performance
Inflation
Protection
Timing
Bottom
Tactical
UP
Duration
Supra
Supply &
Demand
• Philosophy
• Government bond markets are relatively efficient,
driven by fundamentals
• Long term themes drive performance
• Short term inefficiencies present opportunities to
add incremental value
• Strategic (longer term)
• Tactical (shorter term)
In contrast to government bonds, there are greater
inefficiencies within the credit market. By considering
a wider investment universe than many of our peers,
we can uncover value in many areas that are often
overlooked, including unrated and asset backed bonds
and loans. We avoid over-reliance on credit ratings as
the main determinant of relative value, instead adopting
a more forward looking approach to credit analysis.
Our analysts use their extensive corporate knowledge
to produce medium term forecasts of how they expect
the credit fundamentals of an issuer to change.
We also examine the potential impact of a deterioration
in the fundamentals of an issuer and the likely recovery
rate in the event of a default. Our internal rating
methodology is designed not just to determine the
probability of default, but also to identify the protection
offered to our clients through covenants and security.
Our unique approach to managing credit
Philosophy
• Credit markets are relatively innefficient
• Constraints imposed upon the market result in
mis-pricing of key attributes of asset
Benchmarks
Security
• Rule-based index
construction
• Market is not structured
to reflect security as
an attribute
• Weightings based
on indebtedness
• Targeted analysis of
structure and covenants
to identify value
Ratings
Liquidity
• Not comprehensive:
focus on default,
not recovery
• Investors generally
over-value liquidity
• Increasing inflexibility
• Not universally applied
• Long-term investors
can exploit heightened
illiquidity premium
Within both investment grade and high yield credit,
we are value investors. In practice this means that we
place strong emphasis on our own research, preferring
companies with sound long term business models and
bonds that offer strong covenant protection and asset
backing. We believe that credit ratings are a lagging
indicator. Bond investment is about assessing the
probability of default and the recovery rate and we
believe that inefficiencies arise because too little emphasis
is placed on the latter. We create highly diversified
portfolios, in which holding size is a true reflection of
risk, that are designed to be robust under a wide variety
of scenarios. We believe that this process produces
higher and more consistent returns and gives us the
greatest opportunity to meet our clients’ objectives.
With the recent addition to the team of specialist
global high yield expertise, we have been able to
broaden our range of credit strategies. We now offer
sterling investment grade, sterling ethical bond,
sterling duration hedged, European investment grade,
investment grade buy & maintain, bespoke cashflow
matching, sterling higher yield and global high yield.
A highly experienced team and a
strong commitment to service
Our team contains experts in government bonds,
investment grade credit and high yield and their
collective quality is a key factor in our success. Each team
member averages more than 14 years’ market experience,
giving them the confidence to have the courage of their
convictions and to maintain non-consensus positions
where they have strong opinions. We have a deeprooted tradition of independent thinking, using our own
analysis to uncover the best investment opportunities.
We invest for the medium term and believe that our
investment horizons are longer than most of our
competitors. Collectively, this means that our focus is
on value, rather than market momentum or benchmark
weightings. Managing assets on behalf of a wide range
of clients, we have a strong commitment to meeting our
clients’ performance and service objectives, incorporating
personalised service, customised to meet each client’s
individual needs.
A wide range of funds and investment solutions
We pride ourselves on the depth and quality of the fund
range we have developed for our clients. We offer fixed
interest solutions to suit all market conditions either
through a combination of specialist funds or through one
of our diversified, aggregate bond funds. Different clients
have different investment needs and we have developed
funds to meet a range of risk/return profiles. And with
different clients subject to different tax requirements and
investment restrictions, we offer both pooled pension
funds and OEICs. We also offer bespoke, segregated
solutions to enable larger clients to meet their specific
benchmark and performance requirements.
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OUR FUND RANGE AT A GLANCE
Our fixed interest funds fall into one of two categories. Our pooled pension funds are sub-funds of the Royal London
Pooled Pensions Company. Established under a life company structure, they are suitable for investment by authorised
pension schemes. Our OEICs are sub-funds of Royal London Bond Funds ICVC, with the exception of the Sterling
Extra Yield Fund and our Global High Yield Funds which are sub-funds of Royal London Asset Management Bond
Funds PLC, registered in Ireland and regulated by the Central Bank of Ireland.
Credit Funds
UK
Pooled pension funds
OEICs
UK Corporate Bond Fund
Corporate Bond Fund
Benchmark: iBoxx Sterling NonGilt All Maturities Index
Benchmark: iBoxx Sterling Non-Gilt All
Maturities Index
Invests in: predominantly sterling
bonds, including unrated and
sub-investment grade bonds
Invests in: broad range of sterling fixed
interest assets
UK Long Corporate Bond Fund
Benchmark: iBoxx Sterling Non-Gilt All
Maturities Index
Benchmark: iBoxx Sterling NonGilt Over 15 Years Index
Invests in: long dated sterling credit
bonds, including unrated bonds, and
sub-investment bonds
Over 5 Year Corporate Bond Fund
Benchmark: iBoxx Sterling NonGilt Over 5 Year Index
Invests in: predominantly sterling
credit with a duration of over 5 years
Sterling Credit Fund
Invests in: a broad range of sterling fixed
interest assets
Ethical Bond Fund
Benchmark: iBoxx Sterling Non-Gilt All
Maturities Index
Invests in: predominantly investment grade
UK corporate bonds that meet predefined
ethical criteria
Sterling Extra Yield Bond Fund
Invests in: broad range of fixed interest
securities, including investment grade, subinvestment grade and unrated bonds
Duration Hedged Credit Fund
Targets: positive return over the medium term
Invests in: predominantly investment grade
corporate bonds across a range of maturities;
uses derivatives to protect against interest
rate risk and targets duration of zero years
Short Duration Credit Fund
Targets: BofAML 1-5 Year Sterling NonGilt All Stocks Index
Invests in: predominantly UK short dated
corporate fixed interest securities; may invest
in UK corporate bonds with longer maturities,
non-UK corporate bonds, floating rate notes,
government and public securities and money
market instruments
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Pooled pension funds
Credit Funds
(cont.)
Europe
OEICs
European Corporate Bond Fund
Benchmark: Merrill Lynch Corporate &
Collateralised Index
Invests in: predominantly euro-denominated
investment grade credit; may invest in subinvestment grade debt and other securities
issued by European entities
Global High Yield Bond Fund
Global
Benchmark: BoAML BB-B Global NonFinancial High Yield Constrained
Invests in: predominantly sub-investment
grade debt issued by companies domiciled
in the UK, Europe, Asia and the United
States, across the high yield credit spectrum.
The fund may also invest a small portion in
investment grade securities
Short Duration Global High Yield
Bond Fund
Targets: 3 month LIBOR
Invests in: predominantly sub-investment
grade debt issued by companies domiciled
in the UK, Europe, Asia and the United
States, across the high yield credit spectrum.
The fund may also invest a small portion in
investment grade securities
Aggregate/
mixed asset
funds
UK
UK Aggregate Bond Fund
Cash Plus Fund
Benchmark: iBoxx Sterling Overall
Index
Invests in: cash, deposits, money market
instruments, covered bonds, sovereigns,
supranationals and short-dated UK
government securities
Invests in: UK government and
sterling credit bonds, actively allocating
between the two asset classes; may also
invest in index-linked, overseas and
sub-investment grade bonds
UK Long Aggregate Bond Fund
Benchmark: iBoxx Sterling Over 15
Years Overall Index
Invests in: long-dated UK
government and sterling credit bonds,
actively allocating between the two
asset classes; may also invest in indexlinked, overseas and sub-investment
grade bonds
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OUR FUND RANGE AT A GLANCE (CONT.)
Government
bond funds
UK
Pooled pension funds
OEICs
UK Gilt Fund
UK Government Bond Fund
Benchmark: FTSE All Stocks Gilt Index
Benchmark: FTSE All Stocks Gilt Index
Invests in: predominantly UK government
bonds of all maturities, based on economic,
duration and yield curve views
Invests in: predominantly UK government
bonds of all maturities ranges, based on
economic, duration and yield curve views
UK Long Gilt Fund
Index-Linked Fund
Benchmark: FTSE Over 15 Years Gilt Index
Benchmark: FTSE A Index-Linked Gilts
All Stocks Index
Invests in: predominantly long-dated UK
government bonds, based on economic, duration
and yield curve views
Index-Linked Fund
Invests in: broad range of UK government
index-linked bonds to offer insulation
against moves in inflation
Benchmark: FTSE A Index-Linked Over 5
Years Gilt Index
Short Duration Gilt Fund
Invests in: broad range of UK government
index- linked bonds to protect against moves in
inflation
Invests in: predominantly in short dated
UK government bonds; may invest in
overseas government bonds, UK and
overseas corporate bonds, floating rate
notes and money market instruments
Enhanced Index-Linked Fund
Benchmark: FTSE A Index-Linked Over 5
Years Gilt Index
Benchmark: FTA Gilt <5 Years Index
Invests in: predominantly in UK government
and corporate index-linked bonds, as well as
non-sterling government index-linked bonds
and sterling government index-linked bonds
Global
Global Bond Fund
Benchmark: JP Morgan Traded World
Government Bond Index (Hedged)
Invests in: government and non-government
bonds across the globe
International Government
Bond Fund
Benchmark: JP Morgan Traded World
ex-UK Government Bond Index (Hedged)
Invests in: primarily non-Sterling
denominated government bonds, with foreign
currency exposure hedged back to Sterling
Global Index-Linked Fund
Benchmark: Barclays World Government
Inflation-Linked Bond Index
Invests in: predominantly global indexlinked bonds
Short Duration Global Index-Linked
Fund
Benchmark: 50% Barclays UK 1-10 Year
Inflation Linked Bond Index; 50% Barclays
Global 1-10 Year Inflation Linked Bond
Index (GBP Hedged)
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Invests in: predominantly in short dated
UK and global index linked government and
corporate bonds
FIXED INTEREST PRODUCT
RANGE CHARACTERISTICS
Tailored approach for institutional investors
Global High Yield
Ethical Bonds
Sterling Extra Yield
Short Duration
Global High Yield
RETURN
Buy & Maintain Credit
UK Aggregate Bond
Sterling Credit
Global Govt &
Index Linked
UK Gilt/Long Gilt
Duration Hedged Credit
UK Index-Linked Bond
Cash
Short-Dated Bonds
For illustrative purposes only
Cash Plus
RISK
The above chart is for illustrative purposes only, cannot
be relied upon as a guide to actual investment outcomes
and should not be relied upon for the purpose of making
investment decisions.
Past performance is not a guide to future performance.
The value of investments and the income from them is not
guaranteed and may go down as well as up and investors
may not get back the amount originally invested.
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Key Investor Information Documents for OEICs or
Key Features document for RLPPC funds are available on our website.
For further information about any of our products or services, please contact:
Royal London Asset Management
55 Gracechurch Street
London EC3V 0RL
T: 020 7506 6678
F: 020 7506 6796
E: [email protected]
www.rlam.co.uk
Issued by Royal London Asset Management September 2014. Information correct at that date unless otherwise stated.
Royal London Asset Management Limited provides investment management services, registered in England and Wales number 2244297; Royal London Cash
Management Limited provides investment management services, registered in England and Wales number 1963229; Royal London Unit Trust Managers Limited
manages collective investment schemes, registered in England and Wales number 2372439. RLUM (CIS) Limited (previously CIS Unit Managers Limited),
registered in England and Wales number 2369965. All of these companies are authorised and regulated by the Financial Conduct Authority.
Royal London Pooled Pensions Company Limited provides pension services, authorised by the Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority, registered in Scotland number SC048729.
All of these companies are subsidiaries of The Royal London Mutual Insurance Society Limited, registered in England and Wales number 99064. Registered Office: 55
Gracechurch Street, London, EC3V 0RL.
The marketing brand also includes Royal London Asset Management Bond Funds Plc, an umbrella company with segregated liability between sub-funds, authorised and
regulated by the Central Bank of Ireland, registered in Ireland number 364259. Registered office: 70 Sir John Rogerson’s Quay, Dublin 2, Ireland.
627-PRO-08/2014-CH