RLAM launches Global High Yield funds
Royal London Asset Management (RLAM) announces the launch of two new funds designed to meet growing investor demand for income generation from sub-investment grade corporate debt.
Domiciled in Dublin, the funds will be available for sale in the UK from 27 February, subject to regulatory approval.
The Royal London Global High Yield Fund aims to provide a combination of investment growth and income, targeting a return of 1% per annum above that of its benchmark, the BoAML BB-B Global Non-Financial High Yield Constrained Index.
The Royal London Short Duration Global High Yield Fund aims to provide income, targeting a return of 2% per annum above that of its benchmark, 3 month LIBOR, while maintaining a duration position close to two years.
Structured as sub-funds of the Royal London Bond Funds plc umbrella, both funds will invest predominantly in sub-investment grade debt issued by companies domiciled in the UK, Europe, Asia and the United States, across the high yield credit spectrum; a small allocation to investment grade securities is also allowable. The fund manager will be Head of High Yield Azhar Hussain and the assistant fund manager will be Stephen Tapley.
The funds will be managed using RLAM's disciplined, value-oriented credit investment process, focusing on security selection combined with top-down macroeconomic analysis and seeking to exploit inefficiencies within high yield credit markets across the globe. The investment approach focuses on catalysts expected to lead to a change in the risk profile of companies, including scrutiny of the covenants and security of debt issues and the motivations of management and the owners. Risk management is an integral part of the investment process. The funds will be managed within pre-determined regional, sector and security exposures, in order to construct diversified portfolios designed to deliver consistent alpha from multiple sources. Scottish Life, the pensions specialist business of the Royal London Group, is providing access to these funds within their fund range.
Azhar Hussain, manager of the Royal London Global High Yield Fund and the Royal London Short Duration Global High Yield Fund, commented: "High yield bonds offer diversification and good return characteristics. They have equity-like returns with lower risk, are generally less sensitive to interest rate moves and tend to perform well in the early stages of economic recoveries. The current economic environment of low growth and low interest rates is expected to continue for some time and provides a benign default climate, with default rates continuing to fall, benefiting from a virtuous cycle of refinancing. Yield spreads remain attractive as they still overcompensate for the prevailing default rate, and the Royal London Global High Yield Fund and the Royal London Short Duration Global High Yield Fund are ideally suited to taking advantage of the current environment."
Rob Williams, Head of Distribution at RLAM, added: "As a leading asset manager with an excellent long term record of delivering returns for investors in investment grade credit, the launch of the Royal London Global High Yield Fund and the Royal London Short Duration Global High Yield Fund complements our existing range of fixed income funds, enables us to leverage our existing investment capabilities and is closely aligned with the needs of our clients. Global high yield continues to attract significant interest as institutional investors look to diversify their exposure and wholesale investors seek increased levels of yield and we anticipate the continuation of these trends for the foreseeable future."