Threadneedle launches Credit Opportunities Fund

Threadneedle has expanded its Absolute Return range, with the launch of the Threadneedle Credit Opportunities Fund, to be managed by Head of High Yield, Barrie Whitman. Working closely with Barrie on the Fund's management is high yield fund manager Roman Gaiser and investment grade credit fund manager Alasdair Ross. The Fund is authorised for distribution in the UK and will be registered in the coming months for distribution in Europe.

The new addition to the range of ‘Absolute Return strategies' leverages Threadneedle's credit expertise to complement the existing suite of macro-driven absolute return products, aiming for a similar level of performance (1-month Euro Deposit Rate plus 350 basis points - gross of charges and tax - per annum over the medium term) but creating alpha primarily through the team's bottom-up credit views. The UCITS III regulated Threadneedle Credit Opportunities Fund with daily dealing will focus on opportunities within the high yield and investment grade markets, but can also exploit opportunities that arise within other areas of the credit market

The Fund's UCITS III powers give it the potential to generate positive returns when markets are falling as well as rising via its ability to employ short positions through derivatives (outright and hedges), as well as the ability to allocate to cash. Investments will be made in a wide range of credit instruments, including corporate bonds and derivative contracts. In terms of primary investment strategies, the Fund can hold outright long and short positions, as well as pair trades (long one issuer versus short another), basis trades (long physical versus a short in the equivalent derivative contract or vice versa) and capital structure arbitrage trades.

Barrie Whitman, Fund Manager and Head of High Yield at Threadneedle, comments: "The current weak economic environment and the high degree of risk aversion prevalent across financial markets have created a wealth of opportunities. We are able to add value via both traditional and alternative means, or more specifically via both long and short positions in the credit markets. Whilst we expect the market to be subject to ongoing volatility in the near term, there can be no denying that valuations appear cheap and the opportunities to add value are plentiful.

This Fund is likely to appeal to investors who are seeking the potential for positive medium-term (circa 18 months) returns. The multiple sources of alpha incorporated within the Fund, and its usage of long and short investing, means that the Fund's returns are likely to be lowly correlated with those of traditional fixed income portfolios and with other asset classes. As such, the Fund should prove to be a useful diversification tool, allowing investors to reduce overall portfolio risk. With a similar performance target but different sources of alpha compared to Threadneedle's other absolute return funds, the Credit Opportunities Fund could also potentially be used in conjunction with our existing products to diversify risk further in a broader absolute return portfolio."