Spreading the risk

Corporate bonds are far more complex than most investors realise and in order to choose the best one, both the type of bond and how you access the asset class need to be taken into account

Corporate bonds have topped the Investment Management Association sales tables for most of the year. Many investors see bonds as one step up the risk ladder from cash, with corporate bonds at the riskier end of the bond spectrum but still relatively safe – if a company folds, bondholders are ahead of shareholders in the queue for remuneration. But it is much more complex than that. Corporate bond risk depends on the bonds you buy and how you access the asset class. Bond pricing is principally affected by investor perceptions regarding risk. Two key factors are the creditworthiness ...