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Royal London Corporate Bond
This fund offers access to a portfolio of predominantly, but not exclusively, investment grade corporate bonds. The manager has 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 and concentrates 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 manager's 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
Jonathan Platt has been applying his long-term, macroeconomic approach since joining Royal London Group in 1985. In 1992, he became head of fixed interest and has run the Royal London Corporate Bond fund since its launch in March 1999. He is known for swimming against the tide and investing in high yield bonds that lack a credit rating. Shalin Shah became a co-manager on the fund in October 2017. He has been working at Royal London since 2008 and is a qualified actuary.
I work closely with other managers and analysts to share research and investment ideas, allowing us the resources to explore often overlooked opportunities.
Jonathan PlattFund manager
Investment process
Jonathan believes that over-reliance on ratings agencies and inadequate benchmark construction methods leads to inefficiencies that a stock-picking manager can exploit. He pays particular attention to the asset-backed sector and unrated bonds. In addition to credit quality analysis carried out by most bond fund managers, Jonathan goes 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 Jonathan looks at some of the less researched areas of the market, his 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.
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