corporate bonds return 6.05% against 3.54% for cash and -20.7% for all companies sector
Over the past year, investment grade corporate bonds have provided a better total return than any other asset class, according to figures obtained from Lipper.
In the year to 28 September 2001, corporate bonds returned on average 6.05% on a bid to bid net income reinvested basis.
This is almost double the total return of the next best performing asset class, cash, which returned 3.54% over the same period and basis. An investment in UK gilts 12 months ago would have delivered a return of 3.22%, again on a bid to bid net income reinvested basis.
Figures for other major asset classes make grim reading however. Investors who put their money into unit trusts benchmarked against the FTSE 100 would, on average, have seen the value of their holdings fall by 20.1% in the year to 28 September 2001, on a bid to bid net income reinvested basis.
UK All Companies investors fared even worse, with the value of investments dropping 24.36% during the same period.
The All Companies sector returned -20.71% and high yield bonds -5.98% when measured over the same period.
Over three years to 28 September 2001, the average total return available from investments in the FTSE 350 Higher Yield index was significantly higher than all other asset classes, at 18.16%.
High yield bonds also came out on top over five years, with an average return on the same terms of 48.03%.
On average, the UK Corporate Bond sector currently provides the best income returns, yielding 4.94% for the month to the end of September.
The Money Market sector is yielding an average of 4.19%, while gilts provide 3.46% over the same period.
The UK All Companies sector is yielding an average of 1.51%, again over one month to the end of September.
David Aaron, chief executive of the David Aaron partnership, said: 'While we believe that elderly and conservative investors should restrict their bond investments to well-managed corporate bond funds investing in investment grade bonds, there is a large opportunity for income and growth investors to invest in the high yield end of the market.
'Over the past year corporate bonds showed the highest return of any unit trust sector. The European high yield bonds are especially attractive at the moment as the euro is likely to strengthen against the pound, and many European bonds, especially some telecoms, are undervalued. A few yield more than four times the yield of the FTSE 1000.
'We believe the world economy will recover in the spring of 2002 and that high yielding bonds will become much more popular again and so show capital gains as well as exceptionally high incomes.'
The David Aaron Partnership, he said, put great emphasis on ensuring that investors carefully considered what level of capital risk they were prepared to take and therefore which type of capital bond they were comfortable investing in.
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