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As part of the investment management process for the Magnet and Compass range of funds Friends First have recently added a new component fund, specifically the SSGA Global Aggregate Bond Index Fund. This fund replaces the BMO Fixed Interest Fund and the SSGA Indexed European Government Bond Fund, both of which invested exclusively in Eurozone Government Bonds.
As the name would suggest, fixed income refers to a type of investment that provides a return in the form of periodic payments and the eventual return of principal at maturity. A bond’s coupon payments constitute a reliable stream of payments.
Fixed income securities issued by investment grade entities such as sovereign governments, corporations and financial institutions are an important source of capital stability. By definition, principal is to be repaid upon maturity of the security, specifically for higher rated issuers with strong credit ratings it provides an effective form of capital preservation.
Fixed Income has demonstrated and delivered a lower-risk investment over time, provided diversification from equities and thus a degree of protection in equity downturns. Historically correlation between stocks and bonds has been close to zero; by combining low or negatively correlated assets, a portfolio’s expected volatility may be reduced.
Because bonds generally may not move in tandem with stock investments, they help provide diversification in an investor’s portfolio.
Fixed income is a broadly diversified asset in itself. Introducing the Global Aggregate Bond Indexed Fund can also help enhance investors’ core bond holdings by seeking to deliver additional country and interest rate risk diversification. With historically low interest rates in Europe, investing globally may provide return and diversification opportunities by offering exposure to regions where yields are more attractive and/or monetary policy is more supportive.
A globally diversified bond portfolio is likely to be better positioned to weather large year-over-year market gyrations and provide a more stable set of returns over time. An indexed fund allows to access the return of a broad universe of fixed income securities in a cost effective way, which is particularly relevant in the current low-yielding environment.
Our portfolio funds are available across the Friends First suite of Pension, Approved Retirement Funds (ARF), Approved Minimum Retirement Funds (AMRF) and Savings and Investment products.
This article is for Financial Broker use only.
Warning: If you invest in this product, you may lose some or all of the money you invest.
Warning: Past performance is not a reliable guide to future performance.
Warning: The value of your investment can go down as well as up.
Warning: Funds may be affected by changes in currency exchange rates.