We profile some of the most interesting fund launches in recent weeks and examine the performance of a product already on the market.
GOVERNMENT BONDS
With the launch of its global GDP-weighted government bond strategy, Pioneer Investments aims to address the current investment landscape of record low yields.
“The biggest issuers of government debt have also compressed bond yields through their monetary policy and quantitative easing,” said Tanguy Le Saout, Pioneer’s head of European fixed income.
The firm’s new product moves from a market cap-weighted approach to a Gross Domestic Product (GDP)-weighted approach, with the aim of delivering more yield without increasing credit risk.
The GDP-weighted strategy means countries with the largest GDP and fastest growth make up a larger part of the index, the aim being to allay institutional investors’ concerns about the indebtedness
of sovereign entities around the world.
SMART BETA CREDIT
Axa Investment Managers (Axa IM) has launched the Axa WF Euro SmartBeta Credit Bonds fund in response to client demand for a euro-denominated smart beta strategy.
The fund has been designed specifically for institutional investors who are seeking low-cost, fundamentally driven exposure to European credit markets, without having to opt for index-tracking strategies.
Following a ‘buy and maintain’ approach with low turnover, the fund aims to preserve capital by avoiding credit-related losses, minimising transaction costs and aiming to optimise yield.
The fund will invest predominantly in euro-denominated investment grade corporate bonds with high levels of diversification.
GLOBAL EQUITY
Norwegian fund manager Skagen Funds has launched a concentrated, long-only global equity fund, Skagen Focus.
The fund aims to provide investors with exposure to the risk/reward potential of value-biased investing in global markets. Holding about 35 stocks, it is the most concentrated of Skagen’s equity fund range.
The top ten positions in the portfolio are expected to form 40%-50% of the total, a high-conviction approach that aims to increase the chance of outperformance in the long term.
The fund’s portfolio managers will carry out bottom-up analysis of companies, focusing on individual stocks to identify those with hidden value.
Skagen says the fund is likely to have a high active share and an uncorrelated return profile compared to its benchmark, the MSCI World AC TR index.
Companies will be selected from all over the world, regardless of sector, market capitalisation or where they are listed. The portfolio may have a relative bias towards mid-sized companies, as the portfolio managers have greatest experience in this area.
GREEN BONDS
State Street Global Advisors (SSGA) has launched the State Street Global Green Bond Index Fund, which it says is the first Ucits-compliant mutual fund to track the Barclays MSCI Green Bond Index.
Green bonds are debt instruments with similar characteristics to traditional bonds, but the proceeds are exclusively applied to projects or activities that promote environmental sustainability. Examples include the development of renewable energy efficiency projects, pollution prevention and ‘green’ buildings.
The fund is the fourth in SSGA’s Environmental, Social and Governance (ESG) range available to European investors.
Niall O’Leary, head of portfolio strategy, Europe, Middle East and Africa (EMEA) at SSGA, says the firm has seen substantial growth in green bond investing, as investors continue to demand sustainable investment strategies and diversification within their fixed income allocations. He notes that green bond investing has grown considerably in the past year, with over $36 billion (€32.7 billion) of green bonds issued in 2014.
CELEBRATING FIVE YEARS
Hermes Investment Management has celebrated the fifth anniversary of the Hermes Global High Yield Bond Fund. In its five years, the fund has achieved a five-star Morningstar rating.
The fund has returned 54.71% over the five-year period since inception, compared to its benchmark, the Merrill Lynch Global High Yield Constrained 2% ex Financials (Euro hedged) Index, which returned 48.83%.
Managed by co-head of Hermes Credit and senior portfolio manager Fraser Lundie, the fund aims to provide long-term capital appreciation and exceed the return of the benchmark on a rolling three-year basis.
Lundie notes that changes in the valuation and liquidity of high yield credit over the past five years have presented challenges within the asset class. He says this environment has demanded a flexible approach, combined with the ability to invest globally and across the capital structure.
“In the current market, where fixed income risks are heightened and liquidity risk in particular continues to rise, flexible mandates are essential and security selection is as important to us as company selection. In addition, it is vital that managers actively manage duration risk in this uncertain rates environment. We are now seeing attractive relative value versus a year ago and believe we are well-positioned to continue to outperform,” he adds.
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