M & G Strategic Corporate Bond Class X Accumulation

Corporate bond investing is mainly about credit risk. There is no point investing in a bond producing 10% income if the firm is going bust. However when you can get a 5% or 6% yield from quality companies corporate bonds represent value. Today is such an opportunity.

There are currently two reasons to buy corporate bonds. Institutions have unceremoniously dumped corporate bonds. This has driven prices down below the level you would expect with interest rates so low. Fear of corporate failure has put further pressure on prices.

To outline this situation the average AAA bond (the most securely rated types of bonds) is currently trading at 93p. Buyers at these prices are receiving a high fixed yield of around 5.1% and when ‘normality' returns to the market, prices are also likely to appreciate, giving some capital growth. However it should be noted that all corporate bonds can fall in value as well as rise so you could get back less than you invested.

That's why to spread risk we suggest investors consider an actively managed fund such as M&G Strategic Corporate Bond, where the underlying bonds are bought and sold on their relative merits considering interest rates and credit ratings. M&G are favourably positioned to run bond funds, not least because they have always specialised in income yielding investments. They also have their own credit rating department. When you add this to the manager Richard Woolnough's track record, experience and the positioning of the fund in the sweet spot of the corporate bond market here is an opportunity to benefit from a good yield (completely tax free within an ISA or SIPP) with some potential for capital appreciation. For investors seeking yield either to withdraw or roll up the M&G Strategic Corporate Bond Fund is a serious consideration.