The Luxembourg-domiciled fund, which is set to launch in summer subject to regulatory approval, will be a best ideas, pure alpha and market neutral product, designed to deliver a low level of volatility and low correlation to other asset classes.
Bowie, who is head of credit portfolio management at the firm and manager of the £255 million Ignis Corporate Bond fund, will work with his 15-strong credit team in running the new product.
The credit team, which manages in excess of £13 billion, will invest globally in investment grade and high yield credit, via liquid credit default swaps. The fund will aim to exploit relative value opportunities through pair-trades, by identifying pricing dislocations in markets.
The fund also has stringent stop-loss limits, so it can cut positions quickly if necessary. There is an immediate review of the trade if it falls to 25 basis points of the total fund, and there is an instant cut if a trade falls to 50bps.
Bowie said he is not anticipating making money from a default, but is playing relative value from the pair trades. He added the fund will also largely invest in European and US CDS, as they are the most liquid markets. Although the base currency is in euros, it is hedged back to sterling for the GBP share class.
Bowie said: ‘We believe the timing of the launch is now pertinent given the headwinds facing traditional long only credit investment.
‘Eurozone weakness, low bank creditworthiness, poor economic data and inflationary pressures are real concerns, and at the very least we are forecasting a prolonged period of volatility for credit markets. Given this backdrop I, and other members of the team, will be personally investing in the fund from launch.’
He added: ‘We believe the future is in the absolute return space and we think credit is the next one to exploit. I also think one of the key risks to bond investors is yield volatility – or beta – therefore we think investors should have something like this in their toolset to extract alpha.’
Bowie said the fund has been compared with a range of indices and sectors, from sterling credit to high yield emerging bond indices, and has found this fund has zero correlation with all other asset classes.
The fund will sit in the Investment Management Association’s Absolute Return sector, and will have an annual management charge of 0.5% with a performance fee of 10% of any performance generated above the cash rate.
The fund is the second in the firm’s absolute return range, following the launch of its Government Bond fund in March 2011.
Bowie's Corporate Bond fund has delivered 75.2% over three years to 27 April, far outstripping the benchmark’s 48.6%.