Summer 2023: the funds gaining and losing their Elite Ratings
Following its summer investment committee, FundCalibre has awarded seven new Elite Ratings and three...
Royal London Corporate Bond
This fund offers access to a portfolio of predominantly, but not exclusively, investment grade corporate bonds. The managers have proved adept at delving into parts of the fixed income market where others fear to tread and identifying bonds that offer superior risk-adjusted returns. The process is risk aware, concentrating on avoiding losers rather than picking big winners, with the goal of providing an attractive and stable income over time.
Our opinion
What sets Royal London Corporate Bond fund apart from many of its peers is the managers’ ability to identify less well-known bonds with superior risk-adjusted returns. The fund has an attractive yield, and the strength and stability of the team gives us confidence.
Company description
Royal London Asset Management, established in 1988, is a wholly owned and central part of the Royal London Group. It manages investments, pension funds and other assets on behalf of clients. Delivering sustainable sources of income is a particular focus, and managers scrutinise a wider universe than many of their competitors to find opportunities in areas that are often overlooked.
Fund manager
Shalin Shah and Matthew Franklin have been co-managers on this fund since October 2017 and January 2022 respectively. They became lead managers of the fund in February 2023, when Jonathan Platt, who had managed the fund since 1999, relinquished his official management responsibilities.
Shalin Shah is responsible for managing several other corporate bond portfolios at RLAM. He has been working at the firm since 2008, having previously worked at PWC, and is a qualified actuary. Matthew Franklin also co-manages several other corporate bond portfolios at the firm. He joined the company in 2014 as a credit analyst and has a degree in Economics from Durham University.
Shalin Shah and Matthew FranklinFund manager
Investment process
The team pays particular attention to the asset-backed sector and unrated bonds. In addition to credit quality analysis carried out by most bond fund managers, the managers go into painstaking detail, analysing covenant documents to estimate not only the chance of default, but the expected recovery rate too. Royal London Corporate Bond fund is well diversified and typically holds more than 200 names.
ESG
ESG - Integrated
Royal London considers ESG issues as integral to its investment process. It believes that unmanaged ESG risk can lead to unfavourable financial outcomes, so each of the Environment, Social and Governance elements are considered when performing stock analysis. Corporate governance is of particular importance and the team will fully engage with company management and regularly attend company AGMs. Royal London follows an ESG integration framework which includes high quality and targeted credit analysis, targeted interaction with bond issuers and building portfolios with appropriate diversification and with strong covenant protection. Collaborative working relationships between Royal London’s Responsible Investment team and the fixed interest investment teams are key. Both teams are encouraged to meet weekly and to present and share their insights and findings with each other.
Risk
While the managers look at some of the less researched areas of the market, their detailed analysis, as well as the large number of names in the portfolio, goes a long way to reducing single company credit and liquidity risk.
Read more about this fund
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.