How is Artemis High Income dealing with the challenges of liquidity and forthcoming macro challenges?

Since Artemis Fund Managers acquired the strategy, the fund has achieved a return of 193.2% significantly outperforming the IA £ Strategic Bond sector average of 111.4% over the same period. The fund is also first quartile over one and five years.

The high returns have been, in part, achieved by the fund's allocation to sub-investment grade debt. However, commenting on the issue of illiquidity in the asset class, Ralph said: "Liquidity has been poor in the market although bizarrely, after Brexit, liquidity was probably the best it has been for a while. That period of stress after the event saw investors taking opposing views and it allowed stocks to trade.

"Currently, with many funds' high cash levels and the fact we are looking at lower net new bond issuance than we have done for a while (as a result of the loan markets opening up again), liquidity has fallen again. Artemis has three fixed income funds with around £2.5bn in assets. This level is not too cumbersome and means we are able to trade easily in the market.  But liquidity is definitely a factor. Where a company issue is only £200m for example, we would not participate in order to minimise risk."

The fund can however invest up to 20% of the fund in equities and currently this figure is around 15%. The allocation to equity is primarily diversification purposes, notes Ralph.

"In this kind of environment, the opportunity for capital growth from the bond portion of the fund will be scarce, so it is about balancing the two. The Artemis High Income Fund is a bond fund, nonetheless, and the strategy is based on the fact it looks to provide a bond income with an equity kicker. This is why the equity allocation does not go above 20%."

Click here to read more about how the Artemis High Income fund manager assembles a diversified portfolio with a low-to-medium risk profile that aims to navigate key market volatility.