Artemis Corporate Bond Fund
Q2 2025 update
Source for all information: Artemis as at 29 June 2025, unless otherwise stated.
CAPITAL AT RISK. All financial investments involve taking risk and the value of your investment may go down as well as up. This means your investment is not guaranteed and you may not get back as much as you put in. Any income from the investment is also likely to vary and cannot be guaranteed.
This is a marketing communication. Before making any final investment decisions, and to understand the investment risks involved, refer to the fund prospectus (or in the case of investment trusts, Investor Disclosure Document and Articles of Association), available in English, and KIID/KID, available in English and in your local language depending on local country registration, available in the literature library.
Fund objective
To generate a return that exceeds the iBoxx £ Collateralized & Corporates index, after fees, over rolling three-year periods, through a combination of income and capital growth.
Performance
Credit spreads (the difference in yield between corporate bonds and government bonds of the same maturity) started the period by moving wider, as US President Donald Trump announced his global tariff (a tax on imports) policy1. Since then, the direction has been mostly one way – tighter1. Markets recovered over the quarter as they regained some dented confidence.
The fund made 3% over this time, compared with 2.9% from its first benchmark, the iBoxx £ Collateralized & Corporates index2, and 2.6% from its second benchmark, the IA Sterling Corporate Bond sector3.
For full five-year discrete performance, please see the table below. Please remember that past performance is not a guide to the future.
Calendar year performance (%)
| 2024 | 2023 | 2022 | 2021 | 2020 | |
|---|---|---|---|---|---|
| Fund | 3.1 | 10.3 | -15.6 | -0.7 | 14.5 |
| iBoxx £ Collateralized & Corporate Index | 1.7 | 9.9 | -19.4 | -3.0 | 8.8 |
| IA £ Corporate Bond NR | 2.7 | 9.3 | -16.4 | -1.9 | 7.8 |
Past performance is not a guide to the future. Source: Lipper Limited, to 30 June 2025, class I accumulation units in GBP. All figures show total returns with income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class.
Contributors/detractors
Despite a relatively quiet period for primary activity, the fund participated in several of the new issues that came to market over the quarter. On the duration (sensitivity to movements in interest rates) side, we mostly tracked the benchmark.
At the start of April we were able to buy Transurban, the largest toll-road operator in Sydney, which has assets across Australia and in other geographies.
May was the busiest month for issuance in the quarter – we bought utilities Northern Ireland Electricity and Southern Gas, as well as HSBC, IG Group and the RAC.
In June we bought into housing association Blend, along with interdealer brokerage firm TP ICAP, Associated British Ports and finally Bazalgette, the company behind London's super sewer.
We were also active in secondary markets (bonds sold by other investors rather than the issuing company). During the tariff weakness, there were a couple of irregularities where lower-risk names underperformed. Our best guess for what caused this was redemptions from passive funds as these high-quality names in investment grade (bonds issued by companies with a lower risk of default) are usually larger index components. We took advantage of this oddity, adding Haleon, GSK and Tesco, among others, before subsequently selling them after they outperformed in the rebound4.
We bought back into two gas-related bonds, which we originally sold after they became richly valued. As they have underperformed since we sold them, we added them back.
Ørsted was another addition. While it is not out of the woods yet, we felt the market had gone a bit 'over its skis' on the negative press surrounding the renewable energy provider.
In terms of sales, we exited the Digital Realty real estate investment trust after it outperformed and bought back into housing association Places for People, which had gone the other way. Housing associations have underperformed recently and we felt they were one of the few sectors to have benefited from Chancellor Rachel Reeves' 2025 Spending Review, so we closed our underweight (lower-than-average position).
Outlook
The authority of the prime minister and his senior cabinet colleagues appears to have taken a serious blow following the botched welfare reforms. We feel the ability to cut costs has been impaired and it’s unlikely the leadership team will try again in 2025.
The Office for Budget Responsibility also signalled a U-turn on its optimistic growth forecasts5. We feel the numbers never added up, but now the pretence is gone.
If the government can’t cut costs, it will have to raise taxes, in our view. We remain underweight longer-dated bonds as we expect interest rates to rise above expectations in the long term.
Not all hope is lost. The Governor of the Bank of England has been talking about cutting interest rates6 (interest rates strongly influence bond yields, which have an inverse relationship with bond prices). Higher taxes mean lower growth, in our view, which isn’t universally bad for bonds. We are not yet in a sovereign debt crisis.
I suspect the government would prefer to wait until the Budget before dropping the tax bombshell on us. But we believe the bond market won’t give it that luxury. My guess is that the top rate of income tax will go from 45% to 50%. But more taxes are required, I’m afraid.
Notes and references
- https://en.macromicro.me/collections/384/spreads/930/us-credit-spread
- A widely used indicator of the performance of sterling-denominated corporate investment grade bonds, in which the fund invests. It acts as a ‘target benchmark’ that the fund aims to outperform. Management of the fund is not restricted by this benchmark.
- A group of asset managers’ funds that invest in similar asset types to the fund, collated by the Investment Association. It acts as a ’comparator benchmark’ against which the fund’s performance can be compared. Management of the fund is not restricted by this benchmark.
- Factset, Artemis
- https://www.theguardian.com/business/2025/jun/15/reeves-obr-revised-forecast-tax-spending-plans-20bn-hole-autumn-budget
- https://www.bbc.co.uk/news/articles/cqx2pj42395o
Risks specific to Artemis Corporate Bond Fund
- Market volatility risk The value of the fund and any income from it can fall or rise because of movements in stockmarkets, currencies and interest rates, each of which can move irrationally and be affected unpredictably by diverse factors, including political and economic events.
- Currency risk The fund’s assets may be priced in currencies other than the fund base currency. Changes in currency exchange rates can therefore affect the fund's value.
- Bond liquidity risk The fund holds bonds which could prove difficult to sell. As a result, the fund may have to lower the selling price, sell other investments or forego more appealing investment opportunities.
- Credit risk Investments in bonds are affected by interest rates, inflation and credit ratings. It is possible that bond issuers will not pay interest or return the capital. All of these events can reduce the value of bonds held by the fund.
- Derivatives risk The fund may invest in derivatives with the aim of profiting from falling (‘shorting’) as well as rising prices. Should the asset’s value vary in an unexpected way, the fund value could reduce.
- Charges from capital risk Where charges are taken wholly or partly out of a fund's capital, distributable income may be increased at the expense of capital, which may constrain or erode capital growth.
- Emerging markets risk Compared to more established economies, investments in emerging markets may be subject to greater volatility due to differences in generally accepted accounting principles, less governed standards or from economic or political instability. Under certain market conditions assets may be difficult to sell.
- Income risk The payment of income and its level is not guaranteed.
Important information
The intention of Artemis’ ‘investment insights’ articles is to present objective news, information, data and guidance on finance topics drawn from a diverse collection of sources. Content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security or investment by Artemis or any third-party. Potential investors should consider the need for independent financial advice. Any research or analysis has been procured by Artemis for its own use and may be acted on in that connection. The contents of articles are based on sources of information believed to be reliable; however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation is given as to its accuracy or completeness. Any forward-looking statements are based on Artemis’ current opinions, expectations and projections. Articles are provided to you only incidentally, and any opinions expressed are subject to change without notice. The source for all data is Artemis, unless stated otherwise. The value of an investment, and any income from it, can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested.
