In corporate bond funds, what is the minimum percentage of assets that must be invested in sterling-denominated BBB- minus or above corporate bonds?

• A. 60%
• B. 85%
• C. 80%
• D. 90%

Answer: (C)

The key idea is the investment-quality rule for corporate bond funds. For a fund to maintain its investment-grade corporate bond mandate, at least a large portion of its assets must be in high-quality, sterling-denominated bonds. Specifically, at least 80% of the fund’s assets must be invested in sterling-denominated corporate bonds rated BBB- or above. BBB- is the lowest rating considered investment grade, so “BBB- minus or above” covers BBB-, BBB, and all higher grades. This leaves up to 20% of the portfolio free to be placed in other assets or currencies, depending on the fund’s policy.

So 80% is the minimum threshold that ensures the fund remains within its investment-grade, sterling-denominated corporate bond target. The other options would either undershoot or overspecify the minimum, but 80% is the stated floor.