Fixed IncomeJun 5 2014

Altana responds to demand with Ucits

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The Altana Corporate Bonds Ucits fund, which is unconstrained and comes with a synthetic risk reward indicator of three, was unveiled after growing demand to relive the success of the original fund, which delivered gross returns of 13.34 per cent since its inception in 2013.

Stevan Bajic, who recently joined Altana Wealth from Bank Sarasin, has been handed the task of managing the fund, which charges a fee of 1.25 per cent.

His aim will be to invest in a globally diversified corporate bond portfolio with regular income from short-dated and “household name” corporate bonds.

The fund will seek opportunities in all major markets by analysing the credit quality of corporates with “strong defendable business structures”, with forward credit rate analysis conducted on every bond to check its suitability before investing.

Mr Bajic said: “Credit investors are facing many challenges in the current environment of stretched valuations, such as where to source decent returns while being fairly compensated for the risks, how to avoid the liquidity trap, and how to deal with the end of quantitative easing and the threat of rising interest rates.

“With a diverse approach being wary of the potential risks, as well as being patient to exploit bouts of weaknesses investors can still achieve above average returns.”

According to Altana Wealth, the primary aim of the fund is to counter the destructive effects of inflation by delivering real inflation-adjusted returns.

Provider comment: Lee Robinson, founder and chief information office at Altana Wealth, said: “Stevan’s outstanding performance and innovative approach to portfolio construction has already solicited high interest from a Ucits version of this fund. Continued volatile economic conditions mean that investors are desperately trying to find alternative sources of decent stable income for their fixed income portfolios, without compromising on risk and with some form of protection against rising interest rates. The low risk, low volatility and unconstrained structure of this fund is well suited to answering these needs, especially compared to the returns and risks from holding sovereign bonds or bank deposits. We are confident that with Stevan’s impressive experience and track record, investors will be attracted by the high yields and robust returns.”

Adviser comment: Robert Lockie, investment manager and branch principal for London-based Bloomsbury Financial Planning, said: “The fact that it is unconstrained can be good or bad . If you believe that active management decisions add value through security selection and market timing then that would be a good thing. If not, it can give rise to unpredictable style drift that can cause an investor’s portfolio to wander about and make it very difficult to control the risks to which the underlying investors are exposed. A management fee of 1.25 per cent is way more than we would pay for a short-dated bond fund – currently we pay under 30 basis points – but no indication is provided of the total expense ratio, which is likely to add quite a bit for a fund of only €15m (£12m). It has a pretty short history, so its performance to date could be down to skill or luck – just not enough data to tell. Even five years is pretty short-term for distinguishing skill from luck.”

Charges: There is a management fee of 1.25 per cent and no performance fee.

Verdict: The investment strategy sounds reasonable enough, although advisers may prefer to wait before investing to get a better understanding of how this absolute return fund performs under its new Ucits status and whether its approach warrants its 1.25 per cent management fee.