The fund’s NAV decreased by 0.43% over the quarter, versus the Bloomberg GBP Aggregate Corporate Total Return Index, which increased by 0.58%. This takes the full year performance to + 4.3% versus the Index which declined 3.3% in 2021.
Performance of fund for the period
There are two important sources of return for the fund. The first, which is significant and always positive, is the income from the underlying bonds. The yield to maturity of the fund is 4.06%. We received 1.19% in accrued income during the period. The second component of return for the fund is realised / unrealised capital gains or losses. In general, as the fund follows a fundamental buy and hold strategy, this component is largely the result of prices being marked up and down. During the period, this had a small negative contribution of more than 1%. We believe this should revert over time and consequently, our fund should benefit from that.
Performance contributors
The aggregate positive contribution of the top 10 contributors was approximately 0.19%. A combination of different types of securities, such as legacies and corporates, were the top performers. We feel that there is upside among these securities as often spreads remain wider than pre-Covid.
Performance detractors
The aggregate negative contribution of the bottom 10 detractors was approximately 30 bps. We have seen small pockets of underperformance during the quarter, notably some longer dated UK preference shares and Restricted Tier 1s. The Rabobank Certificates also underperformed during the quarter. However, at spreads of close to 450 bps, we feel those securities offer particularly good value.
