By Juliet Schooling Latter on 21 May 2026 in Fixed income
Bond funds are popular with investors wanting to diversify their portfolios away from equities, but it’s important to remember not all bond funds are equal. They may share the broad concept of paying an agreed rate of interest and the principal returned on a future date, but there will be differences.
These include the amount of risk being taken and the exposure to sectors and geographies. That’s why it’s crucial to know exactly what you’re buying. Here we highlight five very different fixed-income portfolios, examine their philosophies, compare their individual holdings, and suggest which investors they suit.
This fund, which aims to produce a monthly income with some capital growth, is suitable for relatively conservative investors. It primarily invests in corporate bonds and a portion of government bonds, with the flexibility to adjust duration in response to interest rates.
The fund’s managers target bonds issued by high-quality companies, which currently include NatWest Group, HSBC Holdings and the Nationwide Building Society*. In addition to economic and political factors, they will examine a potential holding’s track record, business strategy, and earnings performance. We like their highly analytical and flexible process.
According to a recent update, the managers continue to favour those offering resilient cashflows and relative value, particularly within financials, utilities and selected telecoms. “It is becoming more evident that outperformance will increasingly be driven by credit selection, an area where we believe we have a strong track record,” they noted.
Experienced investors seeking diversification will be drawn to this go-anywhere fund, which can invest in bonds issued by governments or companies worldwide. The co-managers, Robert Burrows and Eva Sun-Wai, have a wide array of tools at their disposal for building their portfolio. Their investment process examines the global macroeconomic picture to identify the factors most likely to affect bond markets over the next few years.
They will then decide which bond markets look most attractive before utilising M&G’s global bond team to select the best ideas. We believe their skill sets enable them to build a portfolio that benefits from both long-term trends and short-term tactical investments. In an update, they noted bond markets had been poor following the surge in energy prices due to the Iran conflict: “This caused investors to begin to price in potential interest rate hikes,” they wrote.
Next, we move on to a high income bond fund with a unique strategy. It invests in the so-called junior debt of investment grade companies. The hope is that this offers the best of both worlds: a decent income and less chance of defaulting because they’re still exposed to investment-grade companies. The fund invests in a broadly diversified bond universe and may allocate up to 20% of its net assets to emerging markets.
It usually contains between 130 and 200 holdings but has a low turnover because the managers adopt a buy-and-hold strategy. This helps keep transaction costs down. This fund is probably better suited to more experienced investors who are aware of the potential risks, rather than to those seeking maximum capital stability.
Fixed income investors with slightly larger risk appetites will be drawn to this unconstrained, concentrated global high yield bond fund. It targets income generation and capital growth, but the fact that it focuses on securities rated below investment grade means there’s a greater chance of default. However, this will largely depend on the abilities of the person at the helm, and lead manager Mike Scott has demonstrated excellent stock-picking ability. He also has the option to short positions. This means his portfolio can benefit from falling prices, giving him added flexibility.
Mike’s also supported by a strong team of internal credit analysts whose job it is to analyse potential holdings and assess their ability to meet debt obligations. In a recent update, he noted that consumer discretionary names had been the largest recent positive contributor to relative returns, followed by healthcare, industrials and consumer staples.
This unique high-conviction fund is a riskier option. It offers investors exposure to BlueBay’s best ideas across the challenging emerging market debt universe. It’s a flexible portfolio that can invest in both hard and local-currency debt, as well as sovereign and corporate emerging-market debt. The fund can also short or bet against a sovereign, corporate or currency where it has a strong view, giving it an even wider variety of options.
Of course, the added freedom puts more pressure on the management team to make the right calls and requires expert knowledge of many different areas. The positive is that all three co-managers – Polina Kurdyavko, Anthony Kettle and Brent David – are all very experienced in covering these markets. We regard this as a truly active fund designed to deliver alpha. It has historically achieved this goal, which indicates it has an extremely consistent process.
*Source: fund commentary, Q1 2026
**Source: fund factsheet, 31 March 2026
This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.
Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.
Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.
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