Keep in mind that our commentary on the fund, as well as its past performance, is not a guarantee of what will happen in the future. It is also not financial advice, so you should consider advice if you’re not sure.

Like all investments, your money is at risk. Investments can go down as well as up, and you may not get back what you put in.

How the fund works

The Triodos Sterling Bond Impact Fund aims to generate a positive impact on society and the environment, whilst also generating a stable income, by investing in a portfolio of bonds.

Bonds are investments that represent a loan made that is paid back to the investor. They pay a fixed rate of interest on the loan over a set period, meaning the investor gets fixed income. This fund invests in corporate, green and social bonds, and bonds issued by the UK government known as gilts.

Current economic outlook 

Bond yields in Europe and the US rose over the quarter, which was driven by expectations that central banks would cut interest rates by less than previously thought due to persistently higher inflation.

That said, in June the European Central Bank cut interest rates by 0.25% but sounded a note of caution about further rate cuts in the short-term.

What happens next really depends on the outlook for inflation, which is the key driver for central banks when looking at interest rates policy. Our expectation is that in the UK, Europe and the US inflation will come down overall over the next year, but at a slow pace, with some months even bucking the trend and seeing small rises.

The main risks to inflation picking up again are unstable geopolitics which are very difficult to predict, so we will continue monitoring any developments carefully.

How the fund has performed

The Sterling Bond Impact Fund fell slightly by -0.11%% in the second quarter, slightly behind it’s benchmark which rose by 0.09%.

Within the portfolio government gilts delivered some positive growth, but corporate bonds detracted from performance. This was due to a shift in expectations of fewer interest rate cuts on the back of inflationary concerns.

The Bank of England (BoE) is in a tough spot, with higher core inflation than other countries but slower economic growth compared to the US. BoE officials said the latest inflation data didn't change the overall trend of slowing inflation, and suggested a rate cut might be coming soon.

We still expect one more rate cut in 2024 . We believe long-term bond yields will fall further over the next six months, which should benefit bond investors as it makes the fixed interest bonds pay look more attractive. .

Return

As of 30/06/2024

Calendar year return

You can find more performance figures, including a cumulative performance chart, on the Sterling Bond fund webpage.

Please remember that past performance isn't a guide to future returns.