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Bond funds

What are bond funds?

Bond funds, as indicated by their name, are shares funds investing primarily in bond instruments. They are best for medium-term up to long-term investments in the investment horizon time of 3 years and more, depending on their focus. They can be regarded as the "foundation stone" of the investment portfolio; and they are also good for conservative investors as separate investments. The fluctuation rate of investment value in a bond fund differs pursuant to the investment strategy as defined by the Fund Statute. In general, we can say that it is higher than with money market funds, however in the medium-term horizon time they offer the opportunity of higher investment valuation than money market funds. Depending on the variety of bond instruments, the funds can focus on government bonds, corporate or high yield (speculative) bonds, bonds issued by developed or developing countries, or on their combinations. The fund portfolios are then completed with money market instruments.

How do bond funds work?

Bond funds endeavour to valuate money in the fund as much as possible, primarily by means of interest yields of bond instruments and capital valuation of the instruments. Since the funds can invest in bond instruments denominated in foreign currencies, they are mostly secured against currency risk with respect to the yield potential of bond instruments.


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