Investments  

Fund review: Standard Life Short Duration Credit

The latest bond offering from Standard Life Investments gives investors access to the reincarnated Select Income fund, now called the Short Duration Credit fund.

Fund manager Daniel McKernan took over the £50m portfolio from David Ennett and David Sol in December 2013, having joined SLI in September as head of sterling investment grade credit.

SLI said it hoped to meet ongoing investor demand for credit funds while reducing exposure to duration risk, or sensitivity to interest rate fluctuation.

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At an EGM last month, shareholders in the former Select Income fund voted unanimously in favour of the change in investment strategy and name change, which took hold on 8 January 2014.

The fund will now use derivatives to reduce the duration risk inherent in the corporate bonds held within the portfolio. It has also moved out of the IMA Sterling Corporate Bond sector and now will have a custom-hedged corporate bond index as its benchmark.

SLI currently runs more than £65.5bn across its range of fixed income products, but the global asset manager said the revamped fund will complement its broader

suite of funds, including the Strategic Bond, Corporate Bond, Global Index Linked Bond, Ethical Corporate Bond, UK Gilt and Higher Income funds.

www.standardlifeinvestments.com

Comment:

Having joined Standard Life Investments as head of sterling investment grade credit, Daniel McKernan is an interesting choice to take over this fund, which is expected to seek value in credit spreads but perhaps tilted towards the higher end of the yield curve through its short-dated names.

That said, McKernan boasts a strong CV. He was recruited from Swip last year and brings over two decades of senior credit experience to Standard Life’s 34-strong dedicated credit team.

As bond investors have suffered through central bankers’ games of chicken over interest rates, shorter duration strategies have gained favour among advisers who have sought protection through the flexible approaches of strategic bond funds.

As SLI already offers one of these, it was probably decided investors needed a more specialist fund as well as the catch-all – both valid weapons in advisers’ arsenal against the negative impact of interest rates, which don’t appear to be shifting any time in the immediate future.