If I buy a corporate bond etf and it is trading at 80p on the pound

aparoid89

Active member
146 1
Is it fairly likely that the fund will hold the bonds till maturity and I will receive 100p on the pound? Or do actively managed bond funds like to buy and sell?
 

scose-no-doubt

Veteren member
4,630 954
Speak to a financial advisor about the portfolio, manager and strategy... Or do it yourself. Anyways if it's actively managed the old past performance being no indication of future caveat applies innit.
 

avano

Junior member
34 1
Is it fairly likely that the fund will hold the bonds till maturity and I will receive 100p on the pound? Or do actively managed bond funds like to buy and sell?

When is maturity? In 10 or 20 years? What about if the bonds are recalled? I agree with the other poster. I think you should speak to a professional adviser. Bonds are complicated investments.
 

A Dashing Blade

Experienced member
1,373 170
Bonds are complicated investments.

<snigger>

So what's the structure, this is a closed-fund that holds corporate bonds . . . ?
More info required

However, in general, the managers would be highly unlikely to hold a corp bond until maturity
 

A Dashing Blade

Experienced member
1,373 170
Ahh, ok

It's a bond index tracker fund. It matches (to within proscribed margin of error) a bond index.

Basically it buys the underlying constituents of the underlying index (with a bit of tweaking around the edges)

As the index "offers exposure to Sterling denominated corporate bonds with an expected remaining time to maturity between 1 and 5 years", then as a bond gets within 1 year to maturity, it'll drop out of the index and therefore will be sold by the fund.
 

aparoid89

Active member
146 1
Ahh, ok

It's a bond index tracker fund. It matches (to within proscribed margin of error) a bond index.

Basically it buys the underlying constituents of the underlying index (with a bit of tweaking around the edges)

As the index "offers exposure to Sterling denominated corporate bonds with an expected remaining time to maturity between 1 and 5 years", then as a bond gets within 1 year to maturity, it'll drop out of the index and therefore will be sold by the fund.

So how well do these index bond funds fare over the long term? Im looking at either a gilt or investment grade corporate bond index to supplement my ETF FTSE 100 index.
 

A Dashing Blade

Experienced member
1,373 170
I would have thought these things would be tracking the underlying index to a margin of error of +/- 0.5% of the index.
 

NVP

Legendary member
37,766 2,101
Is it fairly likely that the fund will hold the bonds till maturity and I will receive 100p on the pound? Or do actively managed bond funds like to buy and sell?

I dont follow bonds but assuming the company is still trading on the redemption day the owner of the bond gets the promised face value (not the market price remember)........

I also suspect they try to trade you up to new products usually prior to the event so they dont get to much of a cashflow issue

sorry not my area :smart:
N
 

aparoid89

Active member
146 1
I would have thought these things would be tracking the underlying index to a margin of error of +/- 0.5% of the index.

I meant how well does a bond index fare over the long term. Whats they average rate of return?
 

The Leopard

Experienced member
1,877 1,020
So how well do these index bond funds fare over the long term? Im looking at either a gilt or investment grade corporate bond index to supplement my ETF FTSE 100 index.

Personally I wouldn't (and don't) do this. I would go for a Strategic Bond fund which has far greater flexibility. Look for a manager that has a good track record across a variety of conditions, the flexibility to manage the fund as he sees fit, and the support of a strong team. The point about something in the Strategic sector (rather than government, corporate or junk) is that it can go anywhere, including abroad to a limited extent. It means you won't be stuck when one end of the risk spectrum is sticky.

M&G and Jupiter have very sound examples. My preferred funds are M&G Optimal Income and Jupiter Strategic Bond, although Richard Woolnough has been so successful (especially in protecting investors by moving out of financials before the credit crunch, and then moving back in in time to participate in the rally) that the fund is getting bloated, which could well impact on future performance.

Woolnough has a superb record going back to his Old Mutual days, and the guy was consistently ahead whilst all the others were getting ready to go over the cliff together. Unfortunately every man and his dog has noticed by now, which is why I've started using the Jupiter fund alongside it.

Size is not necessarily detrimental - look at what Neil Woodford is able to do year after year after year even whilst dragging £20 billion around behind him. But it is something worth keeping an eye on.
 
 
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