Schroders has launched a new European fixed income fund for its head of European credit, Citywire can reveal.
The Euro Credit Conviction fund will invest primarily in a portfolio of bonds and other fixed and floating-rate securities denominated in euros.
The lead manager will be Patrick Vogel, head of European credit at Schroders. Vogel also runs the Schroder Euro Corporate Bond fund, which has returned 5.2% over the past year compared with 3.7% from its benchmark Bank of America Merrill Lynch EMU Corporate index and an average of 4% from its peer group.
‘As the eurozone economies move into a stabilisation phase, providing a more supportive environment for credit, we are seeing a sweet-spot for European credit with opportunities across the investment space, particularly in higher yielding investment grade bonds,’ said Vogel.
‘While traditional core euro credit strategies may be constrained to owning low yielding bonds, which dilute the best ideas and therefore the returns that these products could deliver, this fund gives us the flexibility to focus our strategy on the investment opportunities which offer the best potential for returns.’
It will invest across debt issued by corporates, governments, government agencies, and supra-national organisations worldwide, but the government component will be capped at 20%.
The fund will have the scope to invest in financial derivatives, including but not limited to forwards, futures, swaps and options. It will also have the ability to take both long and short positions.
The fund will be benchmarked against the iBoxx Euro Corporate Bond BBB index, and it is expected to employ leverage worth 150% of the total net assets. The leverage taken will be adjusted according to the market’s volatility.
Schroders will use a relative value-at-risk approach to measure its global risk exposure.
Citywire understands that the fees will be 0.5% on the C share class and 1% on other classes.