For Immediate Release: Tuesday 1 August 2000
THE LONG-TERM BENEFITS OF CORPORATE BOND FUNDS
Long term investment comparisons between deposit accounts
and investment funds
The popularity of corporate bond funds can largely be attributed
to their having produced a consistently higher income over
the past ten years, than the steadily declining return on
deposit accounts. Whereas equity income funds provide over
time an increasing income with the potential for capital growth,
corporate bond funds tend to offer a high income from the
outset, albeit with some risk to capital. The attached charts
will help investors understand the long term benefits of corporate
bond funds.
- Over 10 years to 1 July 2000, the annual income on £1,000
invested in an average UK Equity Income unit trust increased
to £63 after 10 years. The income from a Corporate Bond
fund stood at £63; while the savings income on an average
building society deposit account dropped to £22 in the tenth
year, falling from £92 in 1991. [Chart 1]
- The capital invested in an average Corporate Bond fund
in June 1990 had grown by 29% over the 10 years, compared
to 91% in an average UK Equity Income fund. [Chart 2]
- A lump sum of £1,000 invested in an average building society
deposit account in June 1990 added £474 to its value over
10 years, whilst the investment in an average Corporate
Bond fund (including both income and capital growth) more
than doubled to £2,192. The equity income fund grew by 178%
to £2,781 or £3,067 in an equivalent PEP/ISA. [Charts 3/5]
- Over the ten year period to July 2000 average returns
from UK Equity Income funds were similar to those achieved
by UK All Companies and Global Growth funds. After 10 years,
£1,000 invested in the UK Equity Income sector had become
£2,781, compared to £2,938 in the Global Growth sector and
£3,035 in the UK All Companies sector. [Chart 4]
- On regular savings of £50 a month, an equity investment
in a UK All Companies fund outstripped the savings account
deposit after 5 years by £825. The difference increased
to £4,950 over 10 years and £11,745 after 15 years. [Chart
6]
- A £1,000 investment in a UK Equity Income fund was 15%
higher than an equivalent Managed Life Fund investment after
10 years, but 89% higher than the average building society
deposit account for the same period. The difference on a
£50 regular savings plan over 10 years was 4% on the Managed
Life Fund and 56% on a deposit. [Charts 7/8]
- After 15 years, a £1,000 lump sum investment in a UK Equity
Income Fund ran 212% ahead of the deposit account and 56%
ahead of the Managed Life Fund; while the £50 regular savings
unit trust/OEIC plan ended 82% higher than the deposit account
and 14% higher than the managed life fund. [Charts 7/8]
After 10 years, £1,000 in an average UK Equity and Bond
Income Fund beat the Retail Price Index by 75% or 96% in
a PEP/ISA. The deposit account was 8% ahead of the Retail
Prices Index. [Chart 9]
- £1,000 invested in an average fund in the following sectors
over ten years, would have achieved returns of more than
£4,000 – Europe including UK, European Smaller Companies,
North America and North America Smaller Companies.
- A £50 per month regular savings plan over ten years, would
have achieved returns of more than £15,000 in the average
funds of the following sectors – Europe ex UK, Europe inc
UK, European Smaller Companies, North America and North
America Smaller Companies. [Chart 10]
For further information please contact:
Anne McMeehan, Director of Communications, AUTIF - +44 (0)20 7831
0898
Dorian Carrell, Head of Statistics, AUTIF - +44 (0)20 7831 0898
Clare Arber, PR Manager, AUTIF - +44 (0)20 7831 0898
Attachment 1 - Charts
1 - 9 (in PDF Format)
Attachment 2 - Chart
10 (in PDF Format)
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