The Artemis Corporate Bond fund sits within the fixed income allocation of the portfolios.
- High conviction sterling corporate bond fund with an active approach where the managers aim to deliver alpha without any particular style bias.
- Investment decisions influenced by bottom-up analysis, although market position and thematic views are incorporated.
- Year to date, the fund continues to outperform the market as a result of underweight to duration, positive credit selection and positions in Covid recovery plays.
- The fund manager has positively demonstrated his ability to navigate the challenging market conditions that we have experienced over the last 18 months.
This is a high conviction sterling corporate bond fund, managed by Stephen Snowden, who is one of the most experienced fund managers in the sterling corporate bond market. Supported by Grace Le and Juan Valenzuela, who also joined from Aegon/Kames, Mr Snowden enjoys the benefits of having a small team. For example, they can react more quickly and implement decisions more swiftly when opportunities present themselves. Following an active approach, they aim to deliver alpha without any particular style bias.
The fund aims to outperform the iBoxx Sterling Collateralized & Corporates index over rolling three-year periods. The investment philosophy seeks to exploit inefficiencies within corporate bond markets, such as geographic and investor-type segmentation and the impact of index/passive investors.
Interest rate risk tends to be close to benchmark, within a range of +/-1 year, and the managers make use of both macroeconomic and microeconomic input to benefit from opportunities when they present themselves. While the top-down view is important to take advantage of market positions in the yield curve or to express sector or thematic views, the investment decision is always influenced by the bottom-up analysis.
Mr Snowden has built a strong 20-year track record managing sterling corporate investment grade portfolios.
Since he joined Ártemis to launch the Corporate Bond fund, returns have also been very positive, demonstrating his ability to navigate the challenging market conditions that we have experienced over the last 18 months.
Last year was exceptional in terms of opportunities, although we should not expect to see this fund outperforming every year by 5%. The managers harnessed market opportunities with good timing of asset allocation moves. Whilst at the beginning of the year they took conservative positions when valuations were not attractive, they did add risk to the portfolio after the market sell-off triggered by the pandemic. First in the new issuance market of large multinational companies and then gradually added positions into Covid-hit sectors, such as airports, retail, transport and leisure.
This year, the fund continues to outperform the market, thanks to the underweight to duration, around one year, and the positive credit selection. The fund has benefitted from positions in Covid recovery plays, such as pubs and hotels, and from the underweight to expensive sectors such as utilities and telecoms. The additional positive has been the overweight to financials, a sector that has benefited from the rising interest rates and the steepening of the yield curve.
Eduardo Sanchez, Senior Investment Research Analyst
