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Threadneedle targets ABS market for second trust launch
by Sarah Miloudi on Sep 09, 2013 at 11:22
Threadneedle will next month launch an asset backed income trust, the second in its closed-end fund suite.
Following a period of greater conservatism in credit issuance, Threadneedle Investments said it believes now is the right time to reconsider asset backed securities (ABS) and will launch the Threadneedle Asset Backed Income Trust to capture the opportunity.
Run by Henry Cooke, head of Threadneedle's European asset backed desk and formerly a real estate boss at Barclays Capital, the new investment trust will target a net yield of 6%, distributed quarterly, and a total return of between 7% and 10% per year.
To deliver on its income pledge, Cooke will invest in mezzanine ABS from a global universe. He will invest in floating rate notes and as a result the fund will be short duration, offering investors some protection against future rises in rates.
Cooke explained: 'We believe that now is a good time to look at investing in a well selected portfolio of asset backed securities.
'Since the financial crisis a number of areas of fixed income have rallied, providing investors with good returns, however asset backed securities are only now in the process of re-pricing in-line with fixed income markets.
He added: 'ABS is a cheap and wide asset class with over €8 trillion (£6.7 trillion) in assets globally. It is also an under researched area of fixed income providing opportunities for stock selection.'
Roughly a year ago, Threadneedle moved into the investment trust space when Simon Brazier took on the UK Select mandate from Scottish Widows Investment Partnership (Swip), and its next launch will broaden its closed-end offering to clients.
Brazier's tenure has so far gone down well with investors, and his time in charge of the vehicle has seen the trust realigned with his higher alpha Threadneedle UK strategy.
Wealth Manager understands that Threadneedle is hoping to raise in the region of £250 million for its next launch, slightly ahead of the typical £100 million to £200 million often targeted for trust launches, but fitting with the heavy investor demand for income-focused products.
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