You have a life insurance policy or a retirement savings plan, and you want to diversify your investments to obtain better performance. Dated bond funds are back in fashion and could well combine returns with reduced risk. Explanations.
Within a life insurance policy or a retirement savings plan, savers have the choice of diversifying their investments in order to generate more returns. Via units of account, performance is potentially higher, but these assets still represent a risk of capital loss. Shares, real estate funds, SCPIs… The choice is varied.
Among these units of account, we find more and more date bond funds (or lucky bond funds). Dat funds had disappeared due to low interest rates. The return of higher interest rates puts them back in the spotlight, explains Antoine Delon, president of Linxea.
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The particularity of date bonds
The bond fund has a lifespan known in advance, generally 47 years, invested in bonds issued by private companies (i.e. debt securities) and whose maturity (repayment date) is close to the maturity of the fund. These funds are made up of bonds that come from well-rated companies (between AAA and BBB according to the Standard & Poor’s classification) and of high-yield companies (High yield) but more risk (grades of BB+ D).
In return for a higher yield, high-yield securities present a greater risk of capital loss. In order to limit this risk, the fund is therefore made up of bonds from different business sectors and countries. The portfolio can thus contain at least several dozen different lines.
In a context where interest rates have increased significantly, companies are borrowing more expensively. We can find secure portfolios with large companies like Renault for example, which will pay around 4% gross of fees. Add bonds a little more risk, we can have yields of around 6% on average maturities of 4 yearsexplains Yves Conan, CEO of Linxea.
In the current context, the performance of date bond funds is potentially more interesting than a simple fund in euros. As a reminder, the euro fund recorded an average return in 2021 1.28% even if it could reach or approach 2% in 2022.
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Performance. Among the latest bond funds created, we can cite the fund Sycoyield 2026, Sycomore Asset Management’s first chance fund. by 2026, this fund could serve a annualized performance of 2.5% net of fees. The manager Meeschaert Asset Management has also launched its own fund: MAM Target 2027 which could serve an annualized rate gross of 7.03% fee.
Distributor Linxea also offers several dated bond funds in its life insurance and PER contracts, including funds R-co Thematic Target 2026 HY F EUR and Sycoyield 2026 RC. According to the distributor, the yields could range from more than 2% to 4% per year.
Expenses. This is where it gets complicated. Most bond date funds charge entry fees. This is the case, for example, of the Sycoyield 2026 fund, whose subscription fees can reach up to 7%. The MAM Target 2027 fund does not charge entry fees.
Internal management fees are also possible (other than the management fees for your life insurance or PER contract). The Sycoyield 2026 fund charges a maximum of 0.5% in management fees compared to 1.15% for MAM Target 2027. Remember to check with your insurer before subscribing to this type of unit-linked account.
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Zero risk does not exist
Like all types of unit-linked funds, dated bond funds involve risks and the capital is not guaranteed. But in what cases can you really lose part of your investment?
The rise in interest rates. In case of high false corporate borrowing ratesthe bond values may fall. But temporarily. The closer to the fund’s maturity date, the less impact it will have on the fund’s interest rate.
The bankruptcy of a company and the risk of non-payment. As with any investment in corporate bonds, there is a risk to the capital invested by the saver. But the fund managers dats diversify their portfolios enough to smooth out this risk. This scenario is therefore unlikely. As with the impact of borrowing rates on returns, the maturity approach reduces the risk of default.
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What happens to these funds given the chance?
The bonds are sold and the fund is dissolved. To find out if these funds are suitable for your saver profile, it is important to ask yourself what your risk appetite is and what your liquidity needs are. Investing in a unit of account via your life insurance contract or your PER is done in the medium and long term. It cannot be a precautionary saving. To compensate for unforeseen expenses, it will be better to favor funds in euros or the livret A.
Since bond funds are a unit-linked account of your life insurance policy or retirement savings plan, you receive interest each year. You can redeem your units at any time before the maturity date. However, the interest earned will be calculated based on the value of the fund on the date of redemption.
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