Old Mutual Global Investors plans to expand its bond range with a monthly income high yield fund for head of fixed income Christine Johnson.
The fund, co-managed by Bastian Wagner, will target income and capital growth through a portfolio that invests predominantly in global fixed and variable rate debt securities.The team will aim to deliver a 6-7% annual yield.
Duration limits will be -3 to 9 years, which the group said will enable it to take advantage of both rising and falling yield environments.
Citywire + rated Johnson currently manages the Old Mutual Corporate Bond and Old Mutual Monthly Income Bond fund. Over the past three years the Corporate Bond fund has returned 29.5% versus a 25.2% rise by the Markit iBoxx Sterling Corporates index. The Old Mutual Monthly Income fund is up 30% versus 34.3% by the LCI iBoxx Non Gilt/Merrill Lynch GBP HY (50:50) index.
Johnson said: '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.
Co-manager Wagner added: 'Around a third of the market comprises of issues below €350 million 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 €350 million 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.'Subject to regulatory approval, the fund is expected to be launched within the next three months. Johnson currently runs the Old Mutual Corporate Bond and the Old Mutual Monthly Income funds.