Fixed interest funds

Fixed interest funds are also known as bond funds. They may invest in company (‘corporate’) and government bonds. Bonds are given a risk rating by ratings agencies. If the agency classifies a bond as high risk, it will usually be categorised as ‘high yield’, because a higher rate of interest is offered to compensate. If the ratings agency thinks the risk is lower, the bond will usually be categorised as investment grade. Government bonds from developed countries are generally deemed to be the least risky. Strategic bond funds can invest in all these types of bonds, but other funds are limited to one or two areas.