A 10-year track record, a Standard & Poor’s AAA rating, in excess of £1.2bn under management, relative security of capital and a potential return of 4.60%* – is it any wonder that the Invesco Perpetual Corporate Bond Fund is our most popular bond fund?

Why investors like corporate bonds

More and more investors are recognising the merits of including corporate bonds in a portfolio. Corporate bonds are usually less volatile than equities, potentially more rewarding than deposit accounts and offer a much wider choice of investment options than ‘plain vanilla’ government gilts. They provide a balance to a portfolio that may otherwise be overly dependent on equities They’re some of the reasons why fixed interest investments like corporate bond funds should form the core of every prudent investor’s portfolio. But not just any corporate bond fund.

10 years of sound management = 10 years of sound performance

Despite ever-changing market conditions, the fund’s managers - Paul Causer and Paul Read - have produced superior returns and won a string of awards in the process. In fact since its launch in 1995, the fund has out-performed its sector average in 28 out of 39 quarters (see the chart below).

What’s on offer in the year ahead

The aim of the fund is, and always has been, to achieve a high level of overall return – 4.6% is the gross annual income target for the next 12 months.

Going with the flow

Although corporate bonds are essentially fixed interest investments, there’s nothing static about the corporate bond market – it changes all the time. All kinds of businesses issue all kinds of bonds, some being considerably more attractive as investments than others. On top of that, market conditions generally can be good, bad or indifferent. So to achieve success, the managers have to be pragmatic, active and flexible and they are.

The balance: capital growth or capital preservation?

Over the last decade there have some fairly tough conditions to cope with, but the managers have always been prepared to make changes or indeed stick to their guns when necessary. In times of uncertainty, the fund’s focus might shift to capital protection by keeping a higher proportion of its assets in lower risk bonds. These bonds have high credit ratings and are issued by the likes of Sainsbury’s, Barclays and Network Rail. When the economic outlook is more positive capital growth might take pride of place and the emphasis may change to lower rated ‘high yield’ bonds or even overseas bonds. In terms of the immediate future, the managers’ strategy will be to buy the highest quality bonds with a view to preserving capital values.

A stable, robust and flexible investment opportunity

The Invesco Perpetual Corporate Bond is a viable fixed interest alternative to equities. It has an established performance record and its two managers have over 40 years’ between them. Can you afford not to include this star performer in your portfolio?