ISA Share Issue: Cautious BIPS manager Rhys Davies says bond markets still in a sweet spot for income investors

• 09 February 2026
• QuotedData
• Gavin Lumsden

Invesco Bond Income Plus (BIPS), the largest and one of the more cautious funds in the Loan & Bonds sector, is issuing a new tranche of its 7%-yielding shares, but income investors who want to take advantage must move quickly as the offer ends at 2pm on Thursday.

The £423m investment company’s share issue kick starts an effort to raise up to 20% more capital so as to expand the asset base and further reduce shareholders’ costs as a percentage of the portfolio. 

According to Morningstar data, BIPS is already the cheapest in its five-fund sector, charging total annual ongoing charges of 0.89% versus an average of 1.19%.

Over the past five years, since it re-launched from the merger of City Merchants High Yield and Invesco Enhanced Income, BIPS can’t claim to have been been the best performer in its peer group. Its 30.6% total shareholder return over the past 60 months is in fact the lowest in its group where the average return has been almost 48%.

However, that reflects a lower risk stance by fund managers Rhys Davies and Edward Craven who spread the portfolio across a large number of stocks (239) and avoid concentrated positions. Their largest exposure to one issuer is 2.9% in three of Lloyds bank’s high-yield bonds, for example.

BIPS’ 5.4% yield to maturity, which the fund will get if it holds all its loans and bonds until they are repaid, and the 7% dividend yield on its shares are also slightly below the peer group, indicating a bit less risk to capital.

Gearing, or borrowing, is also low at just under 3% at the end of December.

Nevertheless, BIPS has a good track record in dividends, steadily lifting the pay-out from 10p per share in 2020 to 12.25p last year, covered by earnings, or income from investments.

Davies, lead manager of the fund, is conscious that with 54% of assets in the riskiest non-investment grade corporate bonds, and a further 11% unrated, he has to be careful to strike the right balance when buying the loans of companies with stretched balance sheets or chequered credit histories. 

Despite their higher risks, high yield bonds have been popular as central banks have cut interest rates and investors have sought out better levels of income. While subdued, economic growth has been strong enough to avoid a rise in corporate loan defaults. As a result, the sector has notched up nine successive positive months since last April when US President Trump unveiled his global tariffs.

Eye on inflation

After their good run, average corporate bond yields in Europe have fallen to below 6% as their price has risen. Also the “spread”, or gap, between their yields and those of benchmark government bonds have narrowed to historic lows, which is another sign, Davies said, that investors should be wary of becoming complacent as an economic setback could cause those spreads to widen and bond prices to fall.

That said, there are plenty of opportunities with loan and bond issuance remaining strong in response to investor demand. Last month Davies, who appeared on our “Income funds for your ISA” broadcast on 30 January, bought into a new 10-year bond with an attractive 8%-coupon from French sugar producer Tereos.

He said his priority was to keep an eye on inflation and maintain a low exposure to interest rate risk by focusing on shorter-dated loans and bonds of three to five years. Another surge in inflation would require central banks to raise interest rates, which would hit longer-dated debt the hardest, he explained.

Before Russia’s invasion of Ukraine in 2022, Davies said: “I didn’t have to worry about inflation. For the rest of my career I will have to.”

Like its rivals, BIPS shares have been trading at a small premium of 1.7% over the net asset value of the trust’s investments. The offer lets investors buy in at a slightly lower premium of 0.75%. 

“This is a timely opportunity for investors still looking to make use of their ISA allowance, while also gaining exposure to a trust that has historically delivered regular income. Bonds remain a compelling option for those wanting a steadier income stream, even through market turbulence, and BIPS is designed to deliver that through a disciplined, diversified approach,” said Davies.

Invesco Bond Income Plus (BIPS), the £443m high yield debt fund that raised £25m from investors last month, says it is conservatively positioned for the uncertainty stemming from the Middle East as the 7%-yielder reports a steady 8.7% total return for last year and plans to hold dividends at 12.25p this year. In its 2025 results chair Tim Scholefield said BIPS’ “closed ended structure makes it well positioned to take advantage of a sell-off when good quality bonds could be available at deeply discounted prices, locking in returns for the future.”

James Carthew of QuotedData said: “It is great to see BIPS delivering returns ahead of comparative indices and expanding. It is also pleasing to see how it has navigated the twists and turns of 2026, coming into the year positioned relatively defensively. The chairman points out that as a closed-end fund, it should be better able to take advantage of any sell-off in bond prices, when open-ended funds might be forced sellers. Let’s hope it doesn’t come to that, but it is a good argument for favouring trusts over other investment structures.”

01/04/26