Keeping you informed - A new fund

The Trustee is pleased to announce that a new fund is now available for members of the Defined Contribution (DC) Section of the Scheme and members of the Defined Benefit (DB) Section of the Scheme who have Commercial Additional Voluntary Contributions.

PSPS Total Return Bond - active Fund

The PSPS Total Return Bond - active Fund invests in a fund (managed by M&G) that targets a return of cash between 3% and 5% per annum over a market cycle, normally a period of three to five years. Similar funds managed by other providers may be added to this strategy in due course. The annual fee, taken directly from the fund, is 0.35% per annum.

The M&G fund is actively managed and invests directly in a broad range of bonds including investment grade corporate bonds, government bonds, high yield corporate bonds, asset-backed and mortgage-backed bonds, and cash.

A typical allocation is approximately:

10% government bonds, 35% corporate bonds, 30% asset backed bonds, 20% high yield bonds 5% cash and other assets

The manager can significantly adjust this allocation to reflect prevailing market opportunities.

The principal source of returns is derived from corporate bond credit risk and the performance target is achieved through a combination of income from interest payments and capital gains from purchasing undervalued assets. All risk associated with movements in long dated interest rates is removed, thereby reducing the price sensitivity of the fund’s investments to such changes.

As well as targeting the desired return, the manager will also strive to protect the value of investments by reducing risk and allocating to cash (or its equivalents) and low-risk bonds (including government bonds) when market prices for higher risk investments look overvalued.

The fund’s characteristics may make it appealing for a wide variety members including those seeking equity-type returns but with lower risk and price volatility.

The fund will have higher volatility than the PSPS Cash Fund (which has a “Lower” risk rating) due to the credit risk associated with investment in corporate bonds. However, the fund will have lower volatility than the various PSPS bond funds (which have “Medium” risk ratings) due to the fund not being affected by movements in interest rates. The fund has therefore been given a “Lower/Medium” risk rating.

A fund factsheet will be available in due course on the Documents page of this website.