Tideway has launched a hybrid corporate bond fund as the firm looks to lure investors away from equity income stocks facing a more challenging environment.
The Tideway Hybrid Capital Corporate Bond fund will be managed by chief investment officer Pete Doherty and aims to provide capital preservation plus an annual income of 5 per cent.
The portfolio will invest in sterling-denominated hybrid bonds – which can be both fixed income or equity-like instruments – from 25 UK blue chip companies. It is available to investors with a minimum investment of £1,000.
The fund is aimed at those looking for higher income generated from fixed income securities, as opposed to pure equities or bank deposits.
Mr Doherty said: “Current equity market valuations mean the medium- and long-term returns from equity markets will not be great. It is also reasonable to expect that volatility will remain high, which will not suit many investors.”
The fund will focus on corporate bonds in regulated industries such as insurance, banking, utilities and infrastructure.
“Many of our securities are issued by companies where the business is performing well and there is flexibility in the balance sheet. We are then confident to take on the hybrid capital risk,” Mr Doherty said.
“We liken it to ‘buying the worst house on the best street’ – we buy the highest paying bonds from the lowest risk issuers.”
The fund will operate in a market with around £60bn of sterling debt available for purchase.
