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 – you should consider talking to a professional adviser if you’re not sure whether an investment is right for you.

These investments are designed to be held for the long term. 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.

Bond market developments within this period

Overall Q1 2024 was a tougher period for bonds, after a strong run at the end of 2023. Bond yields moved upwards, but the peak was still some way off the levels seen in the second half of 2023. The rise in yields was triggered primarily by upside surprises to data on both economic activity and inflation. Bond yields eased somewhat towards the end of the quarter, when central bankers delivered forward guidance confirming their intention to cut rates. We believe the outlook for interest rates will continue to be a key driver of bond performance over the medium-term.

Performance update

Triodos Sterling Bond Impact Fund had a small negative return of -0.46% (net of fees) over the first quarter of 2024. This was lower than the benchmark of -0.13%.

The return of the fund was driven by some of the government-related bonds within the fund. This includes bonds issued by entities that are government owned or government guaranteed (like European Investment Bank, Landwirtschaftlichte Rentenbank, Council of Europe Development Bank, and German Bank KFW. Both corporate and UK treasury bonds (gilts) had a negative effect.

The negative performance was caused in part by a rise in market interest rates during this period. As interest rates rise, the fixed rate of interest offered by a bond is less competitive. This means the price of the bonds decreases as the returns they offer look less attractive relative to other types of assets like cash savings.

However, we think that the Bank of England could start to cut interest rates around the middle of this year, which could help bond prices.

Return

As of 31/03/2024

Calendar year return

The benchmark of this fund is the Bloomberg Barclays UK Gilt 1-5-year Total Return Unhedged GBP index (50%) and the Bloomberg Barclays Sterling Non-Gilts Total Return Value Unhedged GBP index (50%).

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

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

Changes to the portfolio

Vonovia was added to the fund in February. This social bond is issued to refinance the development of affordable housing units and low-barrier housing.

These projects fulfil housing needs for certain vulnerable population groups such as low-income households, disabled people, seniors, students, and refugees. The affordable housing projects are rented under subsidised housing regulations or at a discount compared to average rent. This gives lower-income households access to decent housing at a time when rents and housing prices in many European cities are rising.