Artemis Corporate Bond Fund update

Source for all information: Artemis as at 30 June 2025, unless otherwise stated.

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 – tighter². 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 index³, and 2.6% from its second benchmark, the IA Sterling Corporate Bond sector⁴.    

For full five-year discrete performance, please see the table below. Please remember that past performance is not a guide to the future. 

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 rebound⁵.  

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 forecasts⁶. 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 rates⁷ (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.