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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
The AJ Bell Favourite funds list is designed to lighten your research load.
There are thousands of funds out there – so we’ve narrowed the field by selecting a high-quality shortlist that we believe can deliver on their objectives over the long term. To make the list, each fund needs to pass our robust, independent selection process.
What have we changed?
We keep our Favourite funds list under constant review to ensure we have the highest conviction in our selections. And we keep an eye open for other funds that may have higher potential to achieve their objectives, or that represent better value. We also look to add new funds to the list, if we feel there are asset classes or areas of the market that our investors aren’t currently provided for.
As a result of this work, we’ve removed the Royal London Corporate Bond fund.
Why have we removed this fund?
Over recent years, the success of the Royal London Sterling Credit team and their investment approach has led to significant inflows for their investment strategies from both institutional and retail investors. The team are now one of, if not the, largest active fund manager investing in the sterling corporate bond market.
This increase in assets under management means that the team need to buy a higher proportion of the overall sterling corporate bond market, and have become larger owners of their favoured bonds.
As an investment strategy gets larger, it usually becomes harder to buy and sell certain assets. Known as liquidity risk, this problem can become more pronounced in stressed market conditions, or if a fund is experiencing large outflows.
So far, Royal London have managed the liquidity of this fund very effectively. This is thanks to their diversified underlying holdings, loyal investor base, and ability to internally cross trades where appropriate to best execution.
However, despite this effective liquidity management, and the impressive returns generated in the fund, our preference is for funds that are part of a smaller overall investment franchise. Such funds can be nimbler with their positioning, giving them a greater chance to both capture opportunities and avoid risks in various market environments.
We hope you find this update useful. The AJ Bell Favourite funds list is designed to help you choose your investments, but isn’t a personal recommendation. If you own funds not included on the list, it doesn’t mean we recommend that you sell them. If you’re not confident about making your own financial decisions, or are looking for advice, you should speak to a suitably qualified financial adviser. Remember that the value of investments can change, and you could lose money as well as make it.
Written by:
Paul Angell
Head of Investment Research
Paul Angell is AJ Bell's Head of Investment Research. Paul began his investment career with a global investment bank in 2010, holding various roles across London and Hong Kong over the following years. He joined AJ Bell in 2023.
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