The MoneyBuilder Income Reduced Duration fund, to launch later this month, provides exposure to the existing MoneyBuilder Income strategy, but uses swaps and futures to reduce duration, with a benchmark of two years.
Although Fidelity’s fixed income team believes UK interest rates will remain low for some time, investors are keen to gain exposure to fixed income markets without interest rate risk.
The fund targets two years in the view it is a ‘risk-efficient’ point on the yield curve, balancing a reduction in interest rate risk with cost effectiveness, while allowing Spreadbury the scope for his active duration strategies.
However, Fidelity said the two-year target is not a reflection of Spreadbury’s view on duration and that the fund will diverge from the two-year neutral position, based on Spreadbury’s active strategy.
At the end of December, Fidelity MoneyBuilder Income’s duration was 7.5 years, slightly below its benchmark of 7.8 years.
The fund is an Oeic, targeted at wealth managers with a minimum investment of £1 million.
The Fidelity MoneyBuilder Income fund, a Citywire Selection star pick, has returned 28.1% over three years to 18 January versus the index’s 31.1%.