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BNY Mellon funds seek to address inefficiencies in bonds indexing

bond_indexBNY Mellon Investment Management has unveiled three Irish-domiciled strategies forming part of its efficient bonds beta range.

According to the fund manager, ‘efficient beta’ refers to techniques used to achieve “competitive index-like or better returns” by addressing inefficiencies in fixed income indexing.

Tools used to address these inefficiencies include credit portfolio trading to reduce transaction costs and improve liquidity, and using market completion tools such as credit derivatives and ETFs to reduce runover.

Paul Benson, head of fixed income efficient beta at Mellon, said: “Efficient fixed income beta feels like a game-changer in the fixed income space, especially during a year like this.

“A typical index approach takes no account of increased risk associated with longer maturity bonds, nor does it make any distinction between issuers with strong underlying fundamentals and those with weaker foundations.”

The BNY Mellon Efficient Global IG Corporate Beta Fund, BNY Mellon Efficient US Fallen Angels Beta Fund and the BNY Mellon Efficient Global High Yield Beta Fund will join the existing efficient beta fund franchise.

The franchise has a total $8.8 billion (€7.5 billion) of assets under management as of 30 June, and includes the BNY Mellon Efficient U.S. High Yield Beta Fund, which has attracted approximately $1.1 billion in assets since its launch in 2017.

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