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How big is the bond opportunity?
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Artemis Corporate Bond
This fund invests in investment grade corporate bonds, with some ability to allocate across the wider fixed income market. Stephen takes a long-term strategic and thematic view, but will also take advantage of short-term opportunities when they present themselves. Stephen and the team combine strong analysis of both the wider macroeconomic picture, and close examination of the fundamentals of corporate bonds, to produce a portfolio designed to weather any economic climate.
Our opinion
Stephen Snowden brings his considerable experience in investment grade fixed interest to bear on the Artemis Corporate Bond fund. He combines his knowledge and understanding of the macroeconomic backdrop with his credit analysis and technical understanding of the bond market. He and his team have a strong process and good track record investing in corporate bonds.
Company description
UK-based Artemis was founded in 1997 as a limited liability partnership. Affiliated Managers Group (AMG) and the management team at Artemis own 100% of the equity of the business. This is a financial partnership; AMG takes a share of the revenues produced by Artemis but does not get involved in the day-to-day running of the business. A recipient of the Elite Provider for Equities rating in 2015, 2016, 2017, 2018 and 2020, Artemis has retained its manager-centric, innovative and supportive culture, which has helped it to attract and retain talented investors.
Fund manager
Stephen began his career at Aegon Asset Management (now Kames Capital) in 1994, having obtained a BSc and an MSc in Finance from Queen’s University in Belfast. By 2000 he was managing Kames’ Sterling Corporate Bond fund. He moved to Old Mutual Asset Managers in 2004 to run their corporate bond fund, before returning to Kames as co-head of fixed income, co-managing Kames Investment Grade Bond fund, Investment Grade Global Bond fund, and the Absolute Return Bond fund in 2011. In 2019 Stephen joined Artemis from Kames Capital, bringing with him four other fixed interest team members.
We believe that corporate bond markets are inefficient and can be beaten. Inefficient markets create opportunities for active managers like my team to exploit.
Stephen SnowdenFund manager
Investment process
Stephen looks at the fundamentals of a company, taking into account where we are in the economic cycle, as well as the outlook for inflation and monetary and fiscal policies. He then analyses corporate profitability and management strategy, assessing whether it’s beneficial for bondholders. He looks at whether there are any factors hindering or improving the company’s competitive positioning and identifies any risks. Valuation then comes into play. How does the bond’s yield compare with others issued by the same company or those issued by its competitors?
Technical factors are then examined. For example, has a company previously over-borrowed, which has driven yields higher, and it’s now trying to repair its balance sheet? This should cause the bonds to recover as debt is reduced. Conversely, a company might be in strong financial shape but undertaking an ambitious merger and acquisition programme, which would increase its debt substantially.
Stephen also analyses whether a company or a sector is suffering from negative sentiment, which has suppressed prices further than the situation warrants, and assesses any structural changes that may materially impact certain sectors. He aims for diversification to avoid any unintended industry or name concentration.
Stephen and the team focus on UK, US and European issues, with at least 80% of their assets in sterling or hedged back to sterling.
ESG
ESG - Integrated
Stephen acknowledges that ESG factors can be a material driver of company fundamentals and, as such, incorporates analysis of these factors into the process. This work is conducted by Artemis, rather than bought in from a third party, and used in conjunction with the fundamental, technical and economic analysis already performed on a stock. Stephen believes this work is based around qualitative factors rather than providing a score, so he needs to integrate them within the stock analysis to ensure they are best captured in the overall analysis of a security. ESG factors are considered at both an individual stock and a portfolio-wide level to ensure no unintended risks are systematically taken.
Risk
Artemis Corporate Bond fund is a reasonably diversified portfolio of 75-150 holdings. It will be invested largely across investment grade corporate bonds (80%), although Stephen can also invest in high yield, hard currency emerging market debt, government bonds and non-rated credit, depending on his view of the economic environment.
Stephen and his team undertake a stringent credit assessment of each company. They canvas a wide range of opinions and information sources to test their assumptions. Stephen is always mindful that growing shareholder value can come at the expense of bondholders, so the motives of the management team are carefully scrutinised.
The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund nor of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.