Artemis Corporate Bond quarterly review, December 2023
Stephen Snowden and Grace Le of the Artemis Corporate Bond Fund report on the fund over the quarter to 31 December 2023.
Source for all information: Artemis as at 31 December 2023, unless otherwise stated.
Fund objective 
The fund aims to generate a return greater than the iBoxx GBP Collateralized & Corporates Index, after fees, over rolling three-year periods. It seeks to do this through a combination of income and capital growth.
Performance
The fund returned 9.0% over the quarter, ahead of its benchmark the iBoxx £ Collateralized & Corporate index1, which rose by 8.3%. It was also ahead of its second benchmark, the IA £ Corporate Bond sector2, which returned 7.9%.
For full five-year discrete performance, please see below. Please remember that past performance is not a guide to the future.
This quarter proved to be a particularly memorable one. In December the US central bank (the Federal Reserve) indicated that it could start cutting interest rates as soon as next Spring. This change in view prompted a huge rally in global bond markets, resulting in the strongest quarterly performance seen for over a decade.
Changes to the fund
In corporate bond markets, a busy October and November were followed by a quieter December. In October we bought newly issued bonds from Thames Water, Barclays, and Coventry Building Society. In November we bought UBS, Realty Income, Places for People, Nestle, London Power Networks, Aviva, Pension Insurance Corp, and Northern Powergrid. In December, we switched out of Thames Water to buy Southern Water.
Following a sharp sell-off in bond markets in the third quarter of the year, we made some changes, adding risk back into the fund, mainly through buying longer-dated bonds. This proved to be timely as they caught the wind of the rally in December. After the rally we rotated back into shorter-dated bonds ready for the start of the new year.
Outlook
While we expected bond prices to rise in the final quarter, the scale and magnitude of the rally was even greater than we had anticipated. But even after that powerful finish to 2024, we still think the bond market is attractive.
The last time UK interest rates were this high, the country thought (incorrectly) that the mid-noughties economic boom would continue. As of now, UK economic data may not point towards disaster - but nor is it suggestive of a long economic boom. Admittedly, the Bank of England was slow to raise interest rates. And it would be no surprise if it is slow to cut them too. But interest rates do seem likely to be cut which, all else being equal, would be supportive for the bond market in 2024.
| Discrete performance, 12 months to 31 December |
2023 | 2022 | 2021 | 2020 | 2019 |
|---|---|---|---|---|---|
| Artemis Corporate Bond Fund | 10.3% | -15.6% | -0.7% | 14.5% | N/A |
| Markit iBoxx Sterling Collzd & Cor (UK Midday) TR | 9.9% | -19.4% | -3.0% | 8.8% | N/A |
| IA £ Corporate Bond NR | 9.3% | -16.4% | -1.9% | 7.8% | N/A |
Source: Lipper to 31 December 2023 for class I accumulation GBP.
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.
Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class.
Risks specific to this 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.
Bond liquidity risk
This 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.
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.
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 will 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.
Income risk
Although the fund aims to pay a regular income, the payment of income and its level is not guaranteed.
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.
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