Best Fixed Income Funds UK to Watch
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Fixed Income Funds are a low-risk asset class that have been known to provide investors with consistent returns. Therefore, this may be a possible way for investors to diversify their funds, and purchase multiple asset classes.
In this guide, we will discuss some of the Popular Fixed Income Funds UK, highlighting various aspects you must consider before investing.
Popular Fixed Income Funds UK List
Found below are ten picks when it comes to investing in the popular fixed income funds UK. In the section that follows, we will discuss these funds one by one, examining their past performance and analysing the type of assets they invest in.
- Vanguard Total Bond Market ETF
- JPMorgan Ultra-Short Income ETF
- 20+ Year Trsy Bond Ishares
- iShares TIPS Bond ETF
- PIMCO Active Bond Exchange-Traded Fund
- iShares Core 1-5 Year USD Bond ETF
- Janus Henderson Fixed Interest Monthly Income Fund
- BlackRock Fixed Income Global Opportunities Fund
- Aberdeen Global Income Fund
- Fidelity US Bond Index Fund
Popular Fixed Income Fund Reviewed
As the global market recovers from a tough 2020 due to the Coronavirus pandemic, bond funds have become a popular investment opportunity due to their low volatility and consistent nature.
If you’re interested in getting involved in the fixed income market, this section will provides a review of 10 popular fixed income funds UK. Each fund will be discussed in detail, touching on their previous performance and analysing the type of assets they invest in.
1. Vanguard Total Bond Market ETF
The first fund we will discuss is the Vanguard Total Bond Market ETF. With net assets of over $302 billion, this fund is one of the most popular fixed income investment funds due to its extremely low costs and consistent returns. Furthermore, because this fund invests primarily in medium-term US Treasuries, it even offers a reliable yield to investors, which is distributed monthly.
Looking at performance, this fund has been incredibly consistent over the past decade, returning over 5% in four of the past ten years. It even returned an impressive 7.71% in 2020, which is admirable given the scale of the Coronavirus lockdown. With an expense ratio of only 0.03%, this fund is also one of the cheapest to hold in the market.
2. JPMorgan Ultra-Short Income ETF
The JPMorgan Ultra-Short Income ETF is a potential option for investors looking to gain exposure to the corporate bond market cost-effectively. This fund predominantly invests in short-term bonds with a duration of less than one year; this allows the fund to minimise risk for investors, as short-term bonds are considered less risky than longer-term ones. Furthermore, this fund mainly targets investment-grade corporate bonds to produce a higher yield for investors.
With an expense ratio of only 0.18%, this fund is relatively inexpensive to invest in compared to its peers. In fact, if you invested £1000 in this fund, you’d essentially only have to pay £1.80 in fees per year. This fund also offers a fixed yield of 1.22% per year.
3. 20+ Year Trsy Bond Ishares
US Treasury bonds are considered one of the safest assets globally, as they are essentially ‘backed’ by the power of the US government – meaning it is extremely unlikely that these bonds would ever experience a default. This type of bond is even used in various financial models as the ‘risk-free rate’. The 20+ Year Trsy Bond Ishares is one of the popular fixed income investment funds UK for gaining exposure to this type of bond, providing you with a very low-risk asset that offers steady capital growth and a reasonable yield.
One beneficial thing about this fund is that because it invests in long-term US Treasury bonds, it can generate higher returns than funds that invest in short-term bonds. Looking at the last couple of years, this fund has performed exceptionally well, returning 14.93% and 17.92% in 2019 and 2020 respectively. Also, the fund offers an annual yield of 1.61% to investors, providing a consistent level of fixed income.
4. iShares TIPS Bond ETF
Inflation essentially refers to the rise in the price of goods and services within an economy over a period of time; as prices all slowly rise, the value of a unit of currency decreases as you may purchase less than you could previously. The iShares TIPS Bond ETF aims to hedge against inflation by investing in bonds that increase in value as inflation rises. Due to this, this fund essentially performs better in high-inflation environments, providing investors with protection against medium-term inflation rates.
Another feature of this fund is the monthly income payment it provides investors. Offering a yield of 1.09%, this fund can supply a consistent passive income level, especially if you are investing more significant amounts. In terms of performance, the iShares TIPS Bond ETF has made a positive return in four of the past five years, even returning a solid 10.91% in 2020 alone. The combination of inflation-protected assets, a consistent yield, and solid returns make this fund a popular UK fixed income fund.
5. PIMCO Active Bond Exchange-Traded Fund
The PIMCO Active Bond Exchange-Traded Fund aims to use a risk-focused approach to investing, employing some high-level fund managers and analysts to actively rebalance and invest in securities that can provide quality risk-adjusted returns. This fund’s assets include US Government bonds and Securitised Debt – this latter asset is slightly riskier than other bond types but can often provide more substantial cash flows.
Offering a high yield of 2.65%, this fund provides a level of fixed income that will appeal to most investors. Furthermore, this fund has made a positive return in seven of the last eight years and has even returned over 7% in the past two years alone.
6. iShares Core 1-5 Year USD Bond ETF
If you’re looking for a fixed income fund with low volatility and a small expense ratio, then the iShares Core 1-5 Year USD Bond ETF represents an interesting investment option. This fund invests in short-term investment-grade bonds, which have the highest credit ratings available. Due to these bonds’ short-term nature, they are often referred to ask ‘risk-free’ – although this isn’t necessarily true, they are as close as users can get to a risk-free asset.
All of the bonds included within this fund have a duration of 1-5 years, leading to a very low-risk asset that is ideal for including within your portfolio if you are looking at stability. This fund has also provided a positive return in each of the past five years, even producing a solid 4.76% return for investors in 2020 which was higher than many market indices. Also, the iShares Core 1-5 Year USD Bond ETF pays a yield of 2.15%, distributed monthly.
7. Janus Henderson Fixed Interest Monthly Income Fund
If you are interested in investing in a fixed income fund but are also looking for higher returns, it may be worth considering the Janus Henderson Fixed Interest Monthly Income Fund. This fund is one of the oldest bond funds in the UK and invests primarily in high-yield bonds. Although these assets are slightly riskier than other bond types, they do offer the potential to generate higher returns.
This is evidenced by the returns this fund has produced in recent times. In 2019, the fund returned 12.80% for investors, which is a high return for a fixed income fund. In addition, the fund has only produced a negative return in one of the last 12 years, highlighting its consistency. Finally, this fund also offers an high yield of 3.90%, one of the highest on our list.
8. BlackRock Fixed Income Global Opportunities Fund
The majority of fixed income funds tend to focus on securities located in developed nations such as the US and the UK, as these securities are deemed the safest. However, if you are looking to diversify your portfolio geographically, investing in the BlackRock Fixed Income Global Opportunities Fund could be a potential way to do this. This fund invests in fixed income securities from a wide range of countries, including China, Italy, Mexico, and France. Through these investments, the fund aims to maximise total return for investors.
Over the past decade, this fund has produced an average yearly return of 3.38%, highlighting how consistent this fund is. One thing to note though, is that it does not offer a yield, setting it apart from other fixed income funds. So, if you invest in this fund, you must be aware that you will not receive a passive income stream.
9. Aberdeen Global Income Fund
The Aberdeen Global Income Fund is another popular UK fixed income funds, as it aims to provide investors with a high level of current income through intelligent investment in debt securities. With over $80 million of assets under management, this fund focuses primarily on government and corporate bonds, which provide steady cash flow through interest payments. Furthermore, these bonds that the fund invests in are located in a wide variety of countries – providing a solid level of diversification to add to the mix.
Since the beginning of 2021, this Global Income Fund has produced a high 10.13% return for investors. Furthermore, if you had invested on this day last year, you would be up over 67%.
10. Fidelity US Bond Index Fund
The last fund we will examine in this guide is the Fidelity US Bond Index Fund. As the name suggests, this fund invests primarily in US Treasury bonds, which allows the fund to be low-risk whilst also providing steady returns. Furthermore, this fund also has one of the lowest expense ratios on the list, clocking in at 0.025% per annum. This means that if you invested £1000 in this fund, you would only have to pay 25p in fees for the whole year.
Looking at returns, this fund has performed well over the past decade, making a positive return in every year apart from 2013. Furthermore, it even returned over 7% in 2019 and 2020, which is impressive considering the market volatility that many other assets experienced. Lastly, the Fidelity US Bond Index Fund even offers a yield of 2.02%, allowing investors to generate a passive income stream.
What are Fixed Income Funds?
Fixed income funds are a specific type of mutual fund that invests in fixed income paying assets. The vast majority of the time, these assets come in the form of bonds. Put simply, bonds are a fixed income security that represents a loan from one party to another. For example, if a company wishes to raise capital, it can do so by issuing bonds. What then happens is that investors or other companies will purchase these bonds, and in return, they will receive periodic interest payments from the issuer. Once the term on the bond is up, the company will repay the initial amount of money they received, also known as the principal.
The reason fixed income funds invest in bonds such as this is because bonds provide a consistent and reliable stream of income through monthly, quarterly, or annual interest payments. These interest payments are determined using the specific interest rate (or bond yield) quoted on the bond. For example, if a bond had a value of £1000 and offered an annual yield of 10%, investors would receive £100 per year in interest payments.
How fixed income funds operate is by pooling money from investors and investing in bonds such as these, which provide a steady income stream via interest payments. As there are many different bond types available, fixed income funds can be segregated by the type of bond they invest in. Some fixed income funds will invest in safer bond types, such as UK GILTs issued by the UK government. Other funds will invest in slightly riskier bond types, such as corporate bonds, which tend to pay a higher yield but have an increased chance of default.
Through their investment in these bonds, fixed income funds can generate capital growth and current income for investors. Capital growth comes from the returns the fund makes; if you invest £1000 and the fund makes an annual return of 3%, you will end the year with £1030 (minus any fees you need to pay). Current income comes from the periodic payments that are made to your account from the fund provider. These payments, as mentioned previously, are derived from the interest payments generated from bond investing.
Popular Fixed Income Funds Brokers
If you like the sound of fixed income funds and are looking to earn a consistent income by investing in one, you must find a reputable broker to facilitate this investment.
this section will review two popular stock brokers that allow users to invest in Popular Fixed income funds.
1. XTB
XTB is a popular UK stock broker that offers trading on more than 2,100 shares and ETFs – all 100% commission-free. Furthermore, spreads at this broker start at just 0.015% for US-listed stocks, making it one of the cheapest options available for UK traders. XTB doesn’t require a minimum deposit to get started and the broker doesn’t charge deposit or withdrawal fees.
XTB’s custom-built stock trading platform – xStation 5, is also available for the web and mobile devices and it comes packed with research tools. You’ll find technical charts and dozens of studies to start, plus a market news feed that includes actionable trade ideas with annotated price charts. The platform also has a market sentiment gauge which allows users to easily see what other traders think about where a stock’s price is headed.
XTB’s platform also includes a stock and ETF screener, which can be really useful for traders. With this tool, users can easily scan the market for stocks that are taking off or that seem poised for a fall. Using the screener, it’s possible to create watchlists and narrow down your search to find better trading opportunities.
XTB is regulated by the UK FCA and CySEC and offers negative balance protection for all traders. In addition, the broker offers customer support by phone, email, and live chat, available 24/5.
76% of retail CFD accounts lose money.
2. AvaTrade
AvaTrade is a UK CFD broker that offers 0% commission trading on over 600 global stocks. The platform also carries dozens of exchange-traded funds (ETFs), stock indices, commodities, and forex pairs for trading. Notably, AvaTrade also offers trading on forex options – but it doesn’t offer stock options at this time.
AvaTrade has a few different trading platforms you may use to trade stocks. Like Pepperstone, this broker gives all traders access to MetaTrader 4 and 5.
Alternatively, the AvaTrade web trading platform and AvaTradeGO platform are available on iOS and Android devices as well . You get watchlists, a market news feed, and dozens of technical studies. On mobile devices, users can access full-screen charts and enter orders with just a few taps.
AvaTrade also has its own social trading app for iOS and Android, called AvaSocial. Although this isn’t integrated into AvaTradeGO, it’s simple to switch back and forth between sharing ideas and setting up trades. AvaSocial also enables copy trading, so you have the ability to mimic the portfolios of more experienced stock traders in just a few taps.
AvaTrade is regulated by the UK FCA and Australia’s ASIC. The platform requires a $100 minimum deposit to open an account and you may pay by credit card, debit card, or bank transfer. AvaTrader offers 24/5 customer service.
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3. FP Markets
FP Markets is a highly regarded online forex and CFD broker known for its comprehensive trading solutions and customer-centric approach. Established in 2005, FP Markets has built a reputation for providing an extensive range of trading instruments, including forex, indices, commodities, and cryptocurrencies, which cater to a diverse range of trading preferences.
One of FP Markets’ standout features is its commitment to offering competitive pricing with tight spreads, ensuring that traders can maximize their profits. The broker also supports various trading platforms, such as MetaTrader 4, MetaTrader 5, and IRESS, allowing traders to choose the platform that best suits their trading style and needs.
FP Markets strongly emphasizes education and resources, providing traders with access to a wealth of educational materials, webinars, and market analysis. This dedication to trader education helps both beginners and experienced traders enhance their trading skills and make informed decisions.
Customer support at FP Markets is highly responsive and available 24/5, ensuring that traders receive prompt assistance whenever needed. Additionally, the broker is regulated by top-tier authorities like ASIC and CySEC, providing traders with a sense of security and trust.
In summary, FP Markets stands out as a reliable and versatile broker. It offers a robust trading environment supported by competitive pricing, excellent educational resources, and top-notch customer service.
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4. Pepperstone
Pepperstone is a popular UK stock brokers for traders who want to use MetaTrader 4 or 5. These popular trading platforms offer unparalleled tools for technical analysis, including the ability to create custom technical studies. You may also backtest trading strategies against historical price data to see how they are likely to perform.
This broker also offers a few extra tools that are built specifically for MetaTrader. For example, there’s a correlation heatmap so investors will be able to see whether the stocks you’re invested in typically move at the same time. There’s also an alarm management tool that lets you create custom alerts based on price changes, trading volume, and more.
Pepperstone carries thousands of share CFDs from the US, UK, Europe, and Australia. The broker’s charges vary based on the market you’re trading – US shares trade commission-free, while UK shares carry a 0.10% commission. So, this broker can be slightly more expensive than some of its peers.
Pepperstone is regulated by the UK FCA and the Australian Securities and Investments Commission (ASIC). The platform doesn’t require a minimum deposit to open an account, which is a major plus if you’re not ready to commit hundreds of pounds to trading just yet.
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5. PrimeXBT
PrimeXBT is an innovative stock broker that caters to a diverse range of traders, from beginners to seasoned professionals. Known for its versatility and user-friendly interface, the platform offers an array of features designed to enhance the trading experience across multiple asset classes.
One of the standout aspects of PrimeXBT is its wide range of available markets. Users can trade in cryptocurrencies, forex, commodities, and indices all from a single account. This flexibility allows traders to diversify their portfolios and take advantage of different market opportunities without needing to switch between platforms.
PrimeXBT offers a suite of trading tools and advanced charting options to help traders make informed decisions. The platform integrates customizable indicators, drawing tools, and multiple timeframes, enabling users to tailor their charts to suit their individual trading strategies. Additionally, PrimeXBT provides leverage trading options, which can amplify potential profits for experienced traders.
The platform’s trading interface is sleek and intuitive, designed to make navigating the markets straightforward. Opening, managing, and closing trades can be done with ease, while the performance of live trades can be tracked in real-time. PrimeXBT also offers an innovative feature known as Covesting, which allows users to follow and replicate the trades of successful strategy managers, providing an educational and potentially profitable experience.
PrimeXBT also prioritizes the security and privacy of its users. The platform employs industry-standard security measures to safeguard user accounts and data, such as two-factor authentication and encryption. Customer support is available to assist traders with any queries they may have, ensuring a smooth and reliable trading experience.
In summary, PrimeXBT stands out as a comprehensive trading platform offering a variety of markets, robust tools, and an easy-to-use interface. Its emphasis on security, diverse asset offerings, and innovative features like Covesting make it an excellent choice for traders looking to explore and capitalize on global market opportunities.
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6. Admiral Markets
Admiral Markets is a globally recognized online trading broker known for its comprehensive range of financial instruments and user-friendly platforms. With a presence in over 40 countries, the company has built a strong reputation for providing a reliable and secure trading environment for both beginner and experienced traders.
One of the standout features of Admiral Markets is its extensive selection of trading instruments, including Forex, stocks, commodities, indices, and more. This variety allows traders to diversify their portfolios and explore different markets with ease. The broker offers competitive spreads and flexible leverage options, catering to various trading styles and strategies.
Admiral Markets is also praised for its robust platforms, particularly MetaTrader 4 and MetaTrader 5, which are equipped with advanced charting tools, technical indicators, and automated trading capabilities. These platforms are available on both desktop and mobile devices, ensuring seamless trading experiences across all devices.
The broker places a strong emphasis on education, providing a wealth of resources such as webinars, tutorials, and market analysis to help traders make informed decisions. Additionally, Admiral Markets is regulated by several reputable financial authorities, ensuring a high level of trust and transparency.
Overall, Admiral Markets stands out as a top-tier broker, offering a comprehensive trading experience supported by excellent customer service and innovative tools.
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7. Trade Nation
Trade Nation is a well-established stock broker known for its reliability and comprehensive range of services. As an FCA regulated broker, traders can trust that their investments are in safe hands. Trade Nation offers a diverse selection of trading options, including stocks, CFDs, spread betting, and forex trading. One of the standout features of Trade Nation is its commitment to providing low-cost fixed spreads, starting from an impressive 0.6 pips for CFDs, ensuring traders can navigate the markets without any surprise fees.
In addition to its impressive range of services, Trade Nation offers compatibility with popular trading platforms, including MetaTrader 4 (MT4) and TN Trader. MetaTrader 4 is renowned for its user-friendly interface and advanced charting capabilities. It is a preferred choice for many traders due to its extensive range of technical indicators, customizable charts, and automated trading options through Expert Advisors (EAs). With Trade Nation’s integration of MT4, traders can access a seamless trading experience with all the familiar features they rely on for their trading decisions.
Trade Nation has developed its proprietary trading platform, TN Trader, catering to traders who prefer a platform tailored to the broker’s offerings and user experience. TN Trader boasts a user-friendly interface and is equipped with a suite of tools, including advanced charting, analysis tools, and real-time market data. It is an excellent option for traders who prefer a platform specifically designed to complement Trade Nation’s services and trading conditions.
Trade Nation also provides regulated signals software that can be used to guide stock trading decisions. As well as this, users can also access a variety of educational resources and analysis tools that can be used to improve trading strategies and make informed stock trading decisions. Users can practice different strategies with the free demo account.
75% of retail investor accounts lose money when trading CFDs with this provider.
8. Fineco
Fineco is listed on the Italian Stock Exchange and is regulated in the UK by the FCA and the PCA.
The platform does not charge any dealing fees when investing in their fund selection. However, you will need to pay a small annual fee for holding the fund; this equates to 0.25% of your position up to £250k and can increase as your position size increases. So, if you invested £1000 in a fixed income fund with Fineco, they would charge you a small fee of £2.50 per year. You would also have to pay the expense ratio that the fund provider charges too.
Fineco does not charge any fees for depositing into your account, and you can do this via bank transfer. In addition to this, if you make a profit and wish to withdraw, Fineco does not charge any withdrawal fees either, meaning more of the profits are yours to keep.
Finally, if you’re looking to purchase shares in other assets alongside fixed income funds, then Fineco has a huge range to choose from. Offering over 13 stock markets from around the world, along with over 5000 ETFs to choose from, there’s sure to be an option for everyone. Alongside this, Fineco also offers FX trading, bonds, and options.
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9. IUX.com
IUX.com is a forex broker designed to empower traders of all experience levels. They offer a comprehensive suite of trading tools, including a wide range of instruments, flexible account types, and the industry-standard MT5 platform. This combination allows you to tailor your trading experience and pursue opportunities across the forex market.
IUX.com boasts competitive spreads, a key factor for maximizing your profit potential. They also advertise high leverage, which can amplify gains (and losses) for experienced traders comfortable with calculated risks. The MT5 platform is a user-friendly and powerful tool, providing advanced charting functionalities and a robust set of technical indicators to help you make informed trading decisions.
IUX.com understands that every trader has unique needs. That’s why they offer a variety of account types, allowing you to select the option that best suits your capital and trading style. This level of flexibility ensures you can enter the market with confidence, knowing your account is set up for your specific goals.
If you’re looking for a forex broker that prioritizes your trading experience, IUX.com is definitely worth considering. Their diverse platform, competitive offerings, and focus on trader empowerment make them a compelling choice for those seeking to navigate the forex market.
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Conclusion
This guide has discussed some of the popular fixed income funds available in the marketplace in 2021, evaluating each fund in terms of performance and reviewing the type of assets the fund invests in. Due to their consistent returns and low-volatility nature, fixed income funds are popular among many investors.
Users should also look to analyse and conduct their own due-dilligence before entering into any new trades.
FAQs
What is a fixed income fund?