M&G is set to launch a new fixed income fund investing in floating rate high yield bonds.
The M&G Global Floating Rate High Yield fund will be managed by James Tomlins, with Stefan Isaacs as deputy manager.
The pair already run the £1.3bn M&G Global High Yield fund and the £132m M&G European High Yield fund, as well as assisting Richard Woolnough select high yield bonds for his £22.3bn M&G Optimal Income fund.
The fund has received FCA approval and is set to be launched on September 11.
The fund will invest in floating rate high yield bonds on a global basis, concentrating on the US and European markets.
The fund is to be launched in response to the changing interest rate environment in the US and UK, with both countries widely expected to raise base interest rates, which is subsequently expected to negatively impact conventional bonds.
Mr Tomlins said floating rate high yield bonds were a “natural hedge to rising interest rates as capital is preserved”.
He also pointed out that floating rate bonds “benefit from rising rates as the coupon goes up as rates rise”.
While the fund’s base currency will be dollars, it will be available to UK investors with a hedged sterling share class and the fund will be placed in the IMA Sterling High Yield sector.
M&G had been running a paper portfolio of the strategy since September 2013, which has a current yield to maturity of 4.3 per cent and Mr Tomlins said he expected the actual fund to have a similar yield at launch.
