Ishrc � Discussion Threads

[jonwig] 10/12/2008 16:12

Two interesting articles, thanks. They just about confirm my reasons for buying here!

(Surprised to be able to access them - most of IC seems to be subscriber-only.)

[kiwi2007] 10/12/2008 15:04

Distress brings opportunity in financial bonds

Created: 9 December 2008
Written by: Moira O'Neill

What would you think if someone told you that two-fifths of Europe's banks would go bust? That's the message that the bond market is effectively sending - and James Foster is convinced that this is one of those rare occasions where the market has got it totally wrong.....

[kiwi2007] 10/12/2008 15:03

Financial bonds dominate ETF

Created: 8 December 2008
Written by: Oliver Ralph

The beauty of exchange-traded funds (ETFs) is that they appear to offer investors wide diversification at relatively low cost. However, the iShares £ Corporate Bond ETF is a lesson in how appearances can be deceptive. Certainly, the low cost is there - a total expense ratio (TER) of 0.2 per cent is substantially lower than the fund's actively managed rivals. But a hefty 74 per cent of the fund is in bonds issued by the financials sector, reflecting the high proportion of financials issuance in the sterling corporate bond market. "Diversification in this fund is not what it should be," comments Mark Glowrey of FixedIncomeInvestor. With yields on corporate bonds, especially those issued by the financial sector, rising this year, it's not surprising that the fund is down 12 per cent in the past 12 months.

However, the iShares £ Corporate Bond Fund is not without its attractions. First of all, it contains only investment grade corporate bonds (those with ratings of BBB- or above), so there's no junk. And the index that it tracks, the iBoxx Sterling Liquid Corporates index, allows just one bond per issuer, with each bond capped at 4 per cent of the index. So, although it's heavily weighted in a single sector, it's not heavily weighted in any single bond. Finally, it's offering an impressive 7.2 per cent yield. With interest rates on the way down and dividends being cut, there's a healthy income on offer for those investors who can look past the likely short-term volatility in the corporate bond market.

[mrphil] 09/12/2008 14:26

Thanks chaps, must admit I did prefer the look of the Invesco fund, and I feel with a monthly drip feed it's probably better to go for a fund rather than individual corporate bonds.

[jonwig] 09/12/2008 12:10

Worth looking at Trustnet for performance figures, etc.
Agree, chasing an extra couple of % points seems a bit reckless ... IMO, etc.

[kiwi2007] 09/12/2008 10:48

Mr.P.. Royal London seems to be using junk or close to junk bonds to get their return.. do you want to take the risk for a couple of % ? Costs are also above Invesco's.. who, apparently, are very well thought of and, looking at their holdings, do seem a lot safer...

[mrphil] 09/12/2008 09:39

Kiwi2007, you mentioned the Invesco Perpetual bond which is one of the favourites currently being suggested by hargreaves and which I was thinking of drip feeding each month. The other one they seem keen on at the moment is the Royal London Sterling Extra Yield Bond Class B Income anyone any thoughts on these?

[jonwig] 09/12/2008 09:22

Does this explain the NAV discrepancy "Tracking Error"?

[kiwi2007] 09/12/2008 09:03

And here's me thinking that the concept of Bond ETFs was relatively simple !!
Could the trading over nav be the MMs marking them up? It all seems very odd but I'm sure there's a simple explanation?

As for the OEICs and unit trusts, unless the general public buy from someone like Hargreaves they'll have a 5% weighting on the front end and fees of over 1% a year... in which case they become much less of a possible bargain...

Oh, the bond sell off wasn't corporate as much as gilt and government apparently (FT quote)

[jonwig] 09/12/2008 08:49

Has the increase of 200,000 units over the weekend been responsible for the fall?
The number of units in issue was 4.9m for quite a while.

RNS Number : 7659J iShares GBP Corporate Bond 09 December 2008
FUND: iShares £ Corporate Bond
DEALING DATE: 08-Dec-08
NAV PER SHARE: GBP 108.0538
NUMBER OF UNITS IN ISSUE: 5,100,000
CODE: SLXX LN


RNS Number : 6839J iShares GBP Corporate Bond 06 December 2008
FUND: iShares £ Corporate Bond
DEALING DATE: 05-Dec-08
NAV PER SHARE: GBP 109.4423
NUMBER OF UNITS IN ISSUE: 4,900,000
CODE: SLXX LN

[jonwig] 09/12/2008 07:39

Kiwi, trading in SLXX yesterday was pretty heavy, overwhelmingly buying with ten trades of 1000+ units (two of 5000). So there's demand for CBs out there.

The press tend to mention Unit Trusts and OEICs because, I suppose, most readers won't use exchanges or a stockbroker.

[kiwi2007] 08/12/2008 20:35

Looks like there was a move out of bonds and into equity earlier... bit premature IMO.

And yes, much more coverage in the press recently, but usually aimed at the unit trust versions with their high entry and running costs... INVESCO PERPETUAL Corporate Bond Income Units looks best of the bunch to me with yield of around 7.7%

Elsewhere, and according to their ETF page, SLXX traded almost at NAV today, why it often trades a couple of pounds over remains a mystery :o(

[jonwig] 08/12/2008 08:33

Quite a few personal finance articles in the weekend press; this is typical:



I don't see how equities can enjoy a broad-based rally whilst CBs are left behind. On the other hand, CBs can rally without equities doing so.

[jonwig] 07/12/2008 16:05

A couple of thoughts about the NAV: first, it may be quoted excluding accrued income, which is about £2 per quarter; second, if some of the underlyings are rarely traded, mark-to-market may insist a lower price is quoted for an underlying than a 'fair value' price - whatever that may be.

In any case, I may contact them about it. Obviously if the premium is pretty settled, it won't matter. but if there's a likelihood of a swift move to discount, it would.



The top holdings in the portfolio look pretty sound: Rabobank, GSK, Wal-Mart, GEC, etc. though BAA and ABN Amro might not be.

When the move to government bonds reaches bubble levels, there may be a rally in CBs - or maybe not.

[hosede] 04/12/2008 15:01

Kiwi
Maybe so - I haven't been following this for that long. But I don't really understand how an ETF can trade significantly above or below its NAV, since the price is not determined by the market. Surely it resembles a unit trust tracker far more than an investmen trust?

[kiwi2007] 04/12/2008 11:25

Hosede..Doesn't it (almost) always trade above NAV ?

I do wonder whether SLXX will perform better than IBCX even if the £ continues to fall... assuming the UK reduces rates further than the ECB (as forecast) then the yield differential between UK base and the yield on SLXX will be much biggerthan that of the ECB/IBCX... I'd assume that would be positive for capital appreciation and perhaps make up for any further fall in the £ (which may not actually fall much further anyway)?

[hosede] 04/12/2008 10:01

Trouble is SLXX is already trading above NAV. Looked at IBCX euro equivalent - but it's trading 20% above sterling NAV which looks a bit steep! Still with the pound collapsing at ever increasing rate maybe not.

[alun rm] 04/12/2008 09:15

Finally we start to see some improvement here.

I have been holding since the end of September, thinking that as interest rates come down the high yeild of corporate bonds would attract some hot money. I'm new to bonds, and I expected a more positive response to the last BofE rate cut. Hopefully any cut today really get this product rocking up. My target is £125, and I'll take any dividends along the way with a smile.

Fingers crossed.

[kiwi2007] 01/12/2008 22:52

Managers concerned over corporate bond prices

* Published Monday , December 01, 2008

Investors making redemptions on their corporate bond fund holdings have received as little as 90 per cent of the official fund value as a result of the current market dislocation, fund management sources have revealed.

[kiwi2007] 01/12/2008 00:02

If bond funds are great, why is mine down?
The buzzword at the moment is safety, which is why gilts, debt issued by the UK government, have soared with the average fund up 4% over three months and 8% over six

-----------



Mark Dampier: Ah, corporate bonds, we meet again

[insipiens] 26/11/2008 10:53

yes, 23rd December

[kiwi2007] 26/11/2008 10:09

182p I believe.. payable Xmas eve!

[kiwi2007] 26/11/2008 08:30

Dividend day?