Cash rates have been on the rise recently but there are several bond funds boasting top long- and short-term total returns while also yielding more than cash accounts.
Savers willing to lock their cash away can receive 5.25% interest per year from a five-year fixed bond courtesy of West Brom Building Society.
This is a high watermark for any investment, but there are some that pay more. Here, Trustnet looks at the bond funds offering yields above 5.25%.
With so many to choose from, however, we have added an additional criterion: they must also have achieved top-quartile returns in their respective peer groups over one year and 10 years, showing good short- and long-term total return potential too. This provides a list of 18 funds, which can be found below.
Source: FE Analytics
Heading the list is PIMCO GIS Emerging Local Bond, the only fund from the IA Global EM Bonds - Local Currency sector. Its 10.49% yield is almost double what can be achieved from a five-year bond at present.
What's more, its 87.8% total return over 10 years and 14.6% return over 12 months show it can offer investors top returns over different timeframes.
Managed by Pramol Dhawan, Ismael Orenstein and Michael Davidson, the £4.9bn fund is the second-largest portfolio on the list behind its stablemate PIMCO GIS Income, which stands out for its whopping £90bn in assets under management.
Run by FE fundinfo Alpha Manager Daniel Ivascyn and Joshua Anderson (alongside deputy and Alpha Manager Alfred Murata), PIMCO GIS Income has made 10.4% over the past year and 48.7% in a decade.
It is recommended by analysts at RSMR, who said the fund is "well suited as a core holding in the global fixed income sector, due to its active style of management and focus on risk-reward metrics".
"PIMCO is one of the world's largest fixed income specialists. It has an impressive research and strategy resource and due to its size can gain access to all areas of the market. This fund represents the group's best ideas and as such should be able to outperform in a variety of market conditions."
PIMCO GIS Income is also the highest-yielding fund from the IA Sterling Strategic Bond sector. The peer group is well represented, with four names on the list above.
The sector with the most representatives in the list above, however, was IA Sterling Corporate Bond, where five funds made the grade. The top-yielding of the group was Schroder Sterling Corporate Bond, which is run by Julien Houdain and Martin Coucke.
With assets under management of £555m, RSMR analysts said it is a "core investment grade corporate bond fund offering" that would be a "good diversifier in a portfolio together with more macro driven options and/or esoteric options".
It is by far the highest-yielding of the peer group (9.32%), with Aegon Investment Grade Bond the next-best with a yield of 5.78%.
At the bottom of the table came two Royal London funds: Corporate Bond and Sterling Credit. The former is headed by Alpha Manager Shalin Shah and co-manager Matthew Franklin, who received the backing of analysts at Hargreaves Lansdown.
It earned a place on the firm's Wealth Shortlist, which noted the managers are prepared to invest in parts of the bond market a lot of other investors ignore.
"Looking in under-researched areas throws up opportunities to boost returns but it can add risk, so we view this as a more adventurous corporate bond fund," the analysts noted, suggesting it could offer a slightly higher yield and greater long-term performance potential, making it a "great option" for someone prepared to accept a little more volatility.
Royal London Sterling Credit, meanwhile, is managed by Alpha Manager Paola Binns, assisted by deputy Alpha Manager Eric Holt. This fund got the nod from analysts at FE Investments, who included it in the firm's Recommended list.
"Although the investment process is straightforward, its execution has made a difference over time, especially during the short periods of sell-off," they said.
The fund does not play on interest rates but looks to add value relative to other corporate bond managers by focusing on bonds that are considered 'less loved' by the rest of the market.
"These include bonds that can be more complex and less liquid due to their associated risk protections, such as covenants and security," FE Investments noted.
Royal London Global Bond Opportunities, managed by Holt and Rachid Semaoune, also appears on the list above and garnered the appreciation of the FE Investments team.
Residing in the IA Global Mixed Bond sector, it was one of just two funds from the peer group, alongside PIMCO Diversified Income Duration.
There were also two funds from the IA Specialist Bond sector: GAM Swiss Re Cat Bond and PIMCO GIS Capital Securities
Lastly, four funds from the IA Sterling High Yield sector appeared, with Aegon High Yield Bond (7.35%) yielding slightly more than Schroder High Yield Opportunities (7.33%). The Schroder fund was the better long-term performer, however, returning 81.1% over the past decade versus Aegon's 76.4%.