Thursday, January 15, 2009

Invesco Sterling Bond Fund

This is my Mom's largest single investment at 12.6% of the portfolio. It wasn't planned this way. I instructed Citibank to buy a given amount of this fund in US Dollars. They bought the same number in Sterling. Soon after that we ditched Citibank. The fund had been doing great when we bought it in November 2005:

But this year it severely underperformed its index. On top of that Sterling has declined against the USD so we lost more in USD terms but that's an unfair comparison as this money was likely to be kept in Sterling or Euro investments in any case. The reason for this year's poor performance is of course the corporate bond market which is 80% of the fund:

So, I guess we'll hold on and wait for corporate bonds to recover?


Anonymous said...

Yes, keep the fund, corporate debt should recover first, with equities following afterwards.

The Invesco Sterling bond fund suffered greater than comparable funds in the sector during 2008. One of the main reasons for this is that the managers took the call to move into bank corporate debt a bit too early, with the spreads of said debt continuing to widen over the remainder of the year. Corporate bond spreads have been closing back over the last few months but are still no where nearback to normal. When spreads do snap back they they should do so quite quickly

Regards - A Fund analyst for a private bank

mOOm said...

Thanks Anon for the comments!