RLAM launches short duration funds
Royal London Asset Management (RLAM) announces the launch of three new funds designed to meet growing investor demand for short duration fixed income funds with lower interest rate risk.
The Royal London Short Duration Gilt Fund , the Royal London Short Duration Credit Fund and the Royal London Short Duration Global Index Linked Fund have received regulatory approval and will be available for investment from 7 October.
The launch of these funds builds on RLAM's existing capabilities within short duration and follows the launch of the Royal London Duration Hedged Credit Fund, in September 2012, and the Royal London Short Duration Global High Yield Fund, in February 2013.
RLAM's suite of short duration funds gives clients more investment choice based on their interest rate expectations and desired level of protection from interest rate risk. The current low interest rate environment has reduced the attraction of longer duration funds for many clients and although interest rates are expected to be held for the next 18 months, the funds will offer some protection from interest rate risk once rates do start to rise.
The funds will be structured as UK-domiciled OEICs and will be sub-funds of the Royal London Bond Funds ICVC umbrella, with institutional and wholesale share classes available. Within the UK institutional market the funds are expected to particularly appeal to financial institutions such as building societies and insurance companies, for whom they will satisfy a number of regulatory requirements. Wholesale share classes will be targeted at UK multi-managers and wealth managers, as well as being distributed via platforms.
The Royal London Short Duration Gilt Fund will be managed by Craig Inches. Duration will be actively managed to exploit movements in short-dated yields, while the fund will also have the flexibility to invest tactically in assets such as index-linked government bonds, corporate bonds, or non-UK government bonds, should any of them present a more attractive investment case than the core asset class.
The Royal London Short Duration Global Index Linked Fund will be managed by George Henderson. The fund will target the shorter end of the maturity spectrum, aiming to deliver inflation-linked returns (i.e. providing protection against inflation) with limited interest rate risk.
The Royal London Short Duration Credit Fund will be managed by Paola Binns. The fund will target shorter dated bonds (up to 10 years maturity), an area of the sterling investment grade credit market, that we believe offers value. Fund duration and tactical allocation to other asset classes (such as gilts and index linked bonds) will be actively managed.
Rob Williams , Head of Distribution at RLAM, comments: "Many of our clients are concerned about the risk to capital from continuing rising yields, leading to increased demand for lower duration products. Building on the success that we have delivered for existing clients, we have developed a range of short duration funds to meet this growing demand. These funds are a key addition to RLAM's fixed income range and offer clients some protection from rising interest rates, as well allowing them to express their duration views in conjunction with our longer duration products."
Jonathan Platt , Head of Fixed Income at RLAM, adds: "The last year has seen improving economic data, potential unwinding of central bank stimulus measures, and guidance on the path of interest rates. Government bond yields in the UK have risen from the historic low levels reached in 2012. Irrespective of the extent and pace of further increases in yields, returns from bonds are likely to be volatile. The natural response of investors to an environment of rising and/or volatile yields is to reduce bond portfolio risk by lowering the overall duration of their portfolio. These funds will enhance investors' ability to do this, while allowing the portfolio managers to focus on enhancing returns through active stock selection, duration management and allocation to other asset classes on a strategic and tactical basis."