Passive Favourite fund updates - May 2022


What is the AJ Bell Favourite funds list?

The AJ Bell Favourite funds list is designed to lighten your research load. There are thousands of funds out there – we’ve narrowed the field by selecting a shortlist of funds we believe can deliver their objectives over the long term. To make the list, each fund needs to pass our robust, independent selection process.

What have we changed?

To ensure we've the highest conviction in our Favourite funds list, we keep it under constant review. That includes scouting for new funds that may have better potential to achieve their objectives.

As a result of this work, we’ve recently removed the M&G Global Macro Bond fund and swapped the iShares Core Global Aggregate Bond ETF from the currency unhedged version to the hedged version.

Why have we made these changes?

The global bond market is significantly influenced by moves in currencies. Global bonds are issued in a different currency to sterling – usually US dollars or euros, as well as others. As a result, movement in these currencies can either help or hinder returns for UK-based investors.

At the moment, there is significant change in the global economy. With central banks trying to tackle the problem of high inflation, movement in currencies is high. As a result, we judge there is a risk these moves may dominate returns in a way that investors in global bond funds may not have anticipated.

Following these changes to the Favourite funds list, our sole selection for the global bond category is now a hedged investment. This removes the risk of movements in currencies, because the value of assets in this fund are hedged to sterling. With currency movements not affecting the performance of the fund, returns will be driven by the performance of the underlying bonds instead.

What else do I need to know about the iShares Core Global Aggregate Bond ETF?

The iShares Core Global Aggregate Bond ETF (GBP Hedged) is designed to track the performance of the Bloomberg Global Aggregate Bond Index.

This index tracks the performance of a wide range of bonds issued by both governments and higher quality companies from across the world. Its large country exposures include the United States, Japan, China and France. The fund is also highly diversified, owning over 9,000 bonds. As the fund is a tracker, it has low costs – the OCF is 0.10% per annum.

We hope you find this update useful. Please remember that it falls to you to monitor and manage your own investments and to make any changes you think are necessary. Keep in mind this is information only, and not a personal recommendation to buy or sell any of the funds referenced above.

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Written by:
Ryan Hughes

Ryan Hughes is Head of Investment Research at AJ Bell. Ryan started his career in 1999 working for an independent financial adviser, progressing to become Head of Portfolio Management at an award-winning advisory firm. Ryan then joined a global asset management firm as a Fund Manager, where he oversaw more than £10bn of multi-asset portfolios and also sat on the investment and global asset allocation committees. After seven years, Ryan joined a small multi-asset boutique managing portfolios for clients all around the world, before joining AJ Bell three years later to help establish our investment capability. As Head of Investment Research, Ryan now oversees all actively managed investment solutions and fund research.