High yield bond funds must invest at least what percentage of assets in sterling-denominated fixed-interest securities?

• A. 50%
• B. 60%
• C. 70%
• D. 80%

Answer: (D)

The key point here is how much of a high-yield bond fund’s portfolio must stay in sterling-denominated fixed‑interest securities to limit currency risk for UK investors. Regulators require a large majority of assets to be in GBP fixed‑income so the fund’s income stream and risk profile align with sterling exposure. That minimum is 80%, meaning at least four-fifths of assets must be in GBP fixed‑rate bonds. The remaining up to 20% can go into other assets, including non‑sterling exposure, but the fund’s core remains GBP fixed‑income to maintain the expected risk/return for a sterling investor base. Choices with lower percentages would permit too much non‑GBP or non‑fixed‑income exposure, which would increase currency and volatility risk and drift away from the intended mandate.