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Kames Strategic Bond fund

25 August 2017

As part of our commitment to customers, we regularly review the performance and ongoing suitability of the funds available through our products.


Zurich is removing the Kames Strategic Bond fund from the Sterling and Zurich panel propositions

As part of our commitment to customers, we regularly review the performance and ongoing suitability of the funds available through our products. We call this ‘funds governance’ and if a fund continues to fall short of these standards, we’ll withdraw it from our fund range.

Our funds governance process has identified that the Kames Strategic Bond fund has failed to meet its own performance targets over an extended period of time. As a result, we’ve decided to withdraw it from our range of panel funds.

Kames has made the following comment about the recent performance of the fund:

“The Kames Strategic Bond Fund has delivered an attractive risk-adjusted total return over the period, but underperformed against the peer group median. The relative underperformance of the Fund is primarily explained by our low level of interest rate risk (duration), as well as our lower allocation to the riskier segments of the fixed income universe. As global fixed income markets have seen a move lower in government bond yields, as well as an outperformance of longer-duration and of higher-risk assets, the Fund has underperformed against the peer group. The funds within the peer group that have been outperforming have been taking, in our view, large amounts of risk which we believe to be unwise at this stage in the economic cycle.

As we invest with a value discipline, we have limited our exposure to overvalued markets and have looked globally for attractive investment opportunities. It is our aim to maximise return for a given level of risk, preserving investor capital and taking opportunities when they arise. Our effective risk management philosophy allows us to run a genuine strategic bond fund which generates appealing risk-adjusted returns.

Our asset allocation and stock selection abilities have benefited performance, in particular implementing relative value trades globally and within asset classes. We have used market beta and alpha to generate returns, and the flexibility of our mandate allows us to take opportunities across the fixed income universe to produce a broad-based, unique return stream over the long-term.

We are long-term, value-seeking investors and implement strategic allocations to those areas of the market with the best risk-reward outcomes. In our view, the risk-reward dynamics of longer-duration assets are unappealing at this point in time. We focus on finding hidden value, which we believe can be gained independent of market direction. This Fund offers an active, global and flexible mandate through which we deliver our asset class expertise to clients in the form of attractive risk-adjusted returns."

Funds and Products affected by closure

This affects customers invested in these funds through the following products:

Sterling Investment Bond
Sterling Kames Strategic Bond
Sterling Kames Strategic Bond 2

Zurich Pension
Zurich Kames Strategic Bond ZP

Sterling ISA and Sterling Investment Account
Kames Strategic Bond A Acc

How does this affect customers investing in these funds?

Existing customers can remain invested in the funds. If they pay into the funds by direct debit, they can continue to do so. However, we’ll no longer accept increases to direct debits, additional lump sum investments or switches into the funds.

The decision to withdraw these funds for new customers does not necessarily affect their ongoing suitability for existing investors.

How will we communicate this closure?

We have written to you with a list of their clients invested in these funds. We’ll also write to your clients but if any of them contact us, we’ll strongly advise them to contact you for more information.

Please note, if you have clients invested in this fund through a Zurich Portfolio then you need to know that we don’t review these funds in the same way as we do for our panel funds and they are still available to new customers.

Download example of customer letter