IMPORTANT INFORMATION
Asset class
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Process
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Differentiators
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Team
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Track record
FOR PROFESSIONAL INVESTORS ONLY. THIS IS A MARKETING COMMUNICATION
On 18 March 2024, Artemis renamed the Artemis Target Return Bond Fund to the Artemis Short-Duration Strategic Bond Fund.
In this fund in five, Stephen Snowden, Fund Manager and Head of Fixed Income, discusses the rationale for the name change and looks at the portfolio from five angles to explain its role as low-beta cash alternative.
Presenting the Artemis Short-Duration Strategic Bond Fund
Third party endorsements are not a recommendation to buy. For sources, dates and other information, visit artemisfunds.com/endorsements
Snowden says the reason for the name change was simply to make it easier for investors to understand what the fund is seeking to achieve in the marketplace – namely allocating across fixed income sectors to deliver attractive risk-adjusted returns.
* Excluding formal firm-wide and fund-level exclusions
“There is still strong demand for lower-beta fixed income funds, and we believe that investors are now looking for more flexible short-duration exposure and opportunities across a range of fixed income sectors,” Stephen says.
In an environment in which interest rates are predicted to fall, Snowden expects all bond funds to benefit. His argument is not that short-duration bonds are more attractive than the rest of the bond market but that, like cash, they can represent a low-beta portion within a broader portfolio.
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“I think there is a space in almost everybody’s portfolio for a defensive or safe fund, but which is also a bit more exciting than cash,” says Snowden. “This lower beta solution is exactly what we are trying to achieve with the Artemis Short-Duration Strategic Bond Fund.”
Ratings as at 31 March 2024. Past performance is not a guide to future. For more information, visit artemisfunds.com/endorsements.
By shifting between different types of bonds as the economic cycle turns and as market conditions change, the managers of the Artemis Short-Duration Strategic Bond Fund aim to preserve capital in difficult times and to profit when conditions improve.
The portfolio is a blend of government bonds, investment grade corporate bonds and high yield bonds. Being a lower beta fund, Snowden says the portfolio will always have a greater weighting to investment grade bonds and a lighter allocation to high yield than traditional strategic bond funds.
While the fund is actively managed, meaning it does not simply ‘buy and hold’, Snowden says this does not mean there is an excessive turnover of holdings within the portfolio.
“Our performance objective is to outperform the Short-Dated Corporate Bond Index, but we are not constrained by that investment universe,” says Snowden.
Snowden says there are not many funds that can be considered direct competitors to the fund. Instead, he says it directly competes against the lower beta building block of an investor’s portfolio, such as cash and money market funds.
In terms of differentiation from cash and money market funds, he says falling interest rates will be a natural tailwind for the fund.
“What differentiates us from other short-dated corporate bond funds is flexibility. Being a strategic bond fund allows us to seek opportunities that funds with a more constrained investment universe don’t have,” he says. “Compared to funds that are pigeon-holed into investing in one area, irrespective of value or opportunity, this extra flexibility has allowed us to deliver superior returns.”
Source: Artemis as at 30 September 2024
5.04%
Distribution yield
£314M
Fund size
2.8 YRS
Modified duration
The fund is jointly managed by Stephen Snowden, Liam O’Donnell and Jack Holmes.
In terms of responsibility, O’Donnell manages the government bond aspect of the portfolio, Holmes looks after the high yield element and Snowden’s specialism is within investment grade corporate bonds.
“We collectively co-manage the fund but run it holistically, not in three separate silos,” says Snowden.
Snowden has 26 years’ investment experience managing corporate bond funds. With previous roles at Aegon and Old Mutual, he joined Artemis in May 2019 to lead the group’s fixed income team.
O’Donnell joined Artemis in November 2023 from Abrdn, where he was Head of Nominal Rates and a fund manager on several strategies including Abrdn’s strategic bond fund. As well as co-manging the fund, he heads up the rates and macro strategy for the wider Artemis fixed income team.
Holmes joined Artemis in June 2019 from Aegon Asset Management, where since 2016 he has co-managed a range of high-yield bond funds.
The fund was launched in December 2019.
According to FE Fundinfo, since launch to 31 May 2024, the fund has generated a capital return of 15.63%, versus the IA Targeted Absolute Return sector which is up 14.54%.
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“The performance of the fund is down to a large number of small incremental gains, rather than one particular bet,” says Snowden. “Some of it is down to the fund’s flexibility, some is down to our asset allocation calls and some is the result of credit and duration calls.”
Past performance is not a guide to the future. Source: Bloomberg, class I accumulation shares in GBP from 3 December 2019 to 31 May 2024. The target benchmark is the Markit iBoxx 1-5 year £ Collateralized & Corporates Index; before 18 March 2024 it was the Bank of England base rate +2.5%. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. The fund launched on 3 December 2019.
Artemis Short-Duration Strategic Bond Fund performance
This is for investment professionals only and should not be relied upon by private investors. The value of investments and the income from them can go down as well as up so you may get back less than you invest. The value of investments in overseas markets may be affected by changes in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. Rising interest rates may cause the value of your investment to fall. The price of bonds with a longer lifetime until maturity is generally more sensitive to interest rate movements than those with a shorter lifetime to maturity. The risk of default is based on the issuers ability to make interest payments and to repay the loan at maturity. Default risk may therefore vary between government issuers as well as between different corporate issuers. Sub-investment grade bonds are considered riskier bonds. They have an increased risk of default which could affect both income and the capital value of the fund investing in them. They can also use financial derivative instruments for investment purposes, which may expose the funds to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Issued by FIL Pensions Management and Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority authorised. Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM1023/382376/SSO/1223
FOR PROFESSIONAL INVESTORS ONLY
