Old Mutual Global Investors Aiming to Launch New Fixed Income Fund
Old Mutual Global Investors Aiming to Launch New Fixed Income Fund. The Old Mutual Monthly Income High Yield Bond Fund
Old Mutual Global Investors today announces that it is aiming to launch The Old Mutual Monthly Income High Yield Bond Fund (‘The Fund’) during the course of the summer of 2014, subject to regulatory approval. The Fund will aim to achieve a total return through a combination of income and capital growth from a well-diversified portfolio predominantly comprising of fixed and variable rate debt securities located worldwide.
The Fund will be managed by Christine Johnson and Bastian Wagner, who work as part of an integrated team, comprising specialists in high yield, financials and investment grade credit, as well as macro strategists and portfolio managers. This team offers an excellent performance record. As at the end of March 2014, the Old Mutual Corporate Bond Fund and the Old Mutual Monthly Income Bond Fund both had first quartile performance over one, three and five years.
The Fund is expected to focus on higher yielding corporate bonds as a means to deliver a strong, regular income stream. The team will seek to deliver a competitive monthly distribution, with a 6—7% annual yield targeted at launch. Distributions will be smoothed to give the end-client as close as possible to a regular income. Capital enhancement – and a positive total return – will be achieved through active management of credit quality and interest rate risk. The Fund’s duration limits will be -3 to 9 years, enabling it to take advantage of both rising and falling yield environments.
Commenting on the rationale behind the planned launch of The Fund, Christine Johnson, Head of Fixed Income at Old Mutual Global Investors, said:
“We believe that there is a market opportunity to launch a product that will meet the continuing need of our clients to access income streams.
“As bank lending continues to contract, there is an increasing supply of good quality, higher yielding issues. The issuing companies are typically from continental – and particularly southern – Europe, long established, with good free cash flows, healthy balance sheets and credible growth prospects. This is a liquid, diversified market – for example, the BofA Merrill Lynch European Currency Fixed & Floating Rate Non-Financial High Yield Index has €242.4bn in issue, representing 541 separate issues.”
Bastian Wagner, Portfolio Manager – Fixed Income, added:
“Around a third of the market comprises of issues below €350m and we believe that this part of the market represents a particularly attractive opportunity. Companies issuing in this area are in many cases new to the bond market and issues under €350m are too small to be investible by the mega-funds. For these reasons, they will often offer somewhat better terms to those in the broader market.”
The team’s investment approach is big picture and thematic, emphasising analysis of real world trends in politics, economics, business and society. The team monitors each of its themes through an external indicator and expresses its views through simple, liquid positions. In reducing the investible market from ~3500 bonds to ~150, the team use a number of screens which reflect their thematic preferences. The team tests the market factors (risk appetite, spreads and investment flows) and liquidity (volatility, valuation, age of bond, pricing frequency). A further test for credit quality is undertaken through financial modelling and meetings with the management of the companies in which the team invests. The detailed modelling of each stock is debated at a weekly meeting of the full credit team.
The final selection depends on the level of conviction, sector overlap, portfolio diversification and position limits. Any stock bought should fit the themes, be of stable or improving credit quality, trade cheap or fair to its peers and have a catalyst for price appreciation. The team sells a stock when any one of these factors no longer applies.
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Notes for editors:
Old Mutual Global Investors
With assets under management of £16 billon*, Old Mutual Global Investors has grown strongly since its creation in August 2012. Old Mutual Global Investors is the asset management division of Old Mutual Wealth. The team consists of 184 industry professionals, including a team of 47 investment professionals. As part of Old Mutual Group it has a strong financial parent to support the activation of its business strategy. To find out more information please go to: www.omglobalinvestors.com
Old Mutual Wealth:
Old Mutual Wealth, comprising Skandia and Old Mutual Global Investors, provides wealth management solutions such as investments, pensions and life assurance to help financial advisers manage their clients’ wealth. The business currently oversees £78.5 billion* in customer investments and has operations in the UK, Continental Europe and various international markets. Its strategy is to combine asset management with product and platform expertise, in order to grow further as a modern, integrated wealth management business that enables positive futures for its customers.
Old Mutual Wealth is a core part of Old Mutual plc, a leading international long-term savings, investment and protection Group. Based in London, it is trusted by more than 16 million customers across the world. For over 167 years, it has been serving the growing insurance and investment needs of local customers, companies and their advisers. Old Mutual’s vision is to become its customers’ most trusted partner, being passionate about helping them achieve their lifetime financial goals.
*as at 31 December 2013
Please remember that past performance is not a guide to future performance. Investment involves risks. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested.
Old Mutual Global Investors is the trading name of Old Mutual Global Investors (UK) Limited, Old Mutual Fund Managers Limited and Old Mutual Investment Management Limited. Old Mutual Global Investors (UK) Limited is registered in England & Wales under number 02949554, Old Mutual Fund Managers Limited is registered in England & Wales under number 01825772 and Old Mutual Investment Management Limited is registered in England & Wales under number 4227837. Authorised and regulated by the Financial Conduct Authority with FCA register numbers 171847, 1193240, 208543 respectively, VAT number 386 1301 59. OMGI 05/14/0022.