Fixed Income 

Threadneedle unveils global corporate bond fund

Daniel Liberto

The fund will invest primarily in diversified investment-grade bonds, money market instruments and cash, either directly or indirectly through derivatives, across global markets.

Its benchmark is the Barclays Capital Global Aggregate Corporates Index hedged to US dollars, with the fund targeting at least 150 to 175 basis points gross above the index over rolling three-year periods.

Speaking on the launch, he said: “In a low-yield environment, exposure to corporate credit can provide an effective way for investors to preserve capital and generate income while diversifying their portfolio, away from the volatility of equity markets.

“The fund aims to generate positive return over and above the market return through active management of issuer selection, industry exposure and fixed income asset allocation.”

Mr Ross will have the expertise of 15 investment grade analysts to call on when running the fund, each based in different cities across the world.

The fund will draw on the combined knowledge of the 83-strong global fixed income team, led by Jim Cielinski.

Mr Ross also manages the Threadneedle European Corporate Bond fund.

Provider view

Jim Cielinski, head of fixed income at Threadneedle, said: “The global investment grade market has been growing at an average of circa 10 per cent a year in the last 10 years and offers a large universe of around 1,400 issuers, dominated by US dollar, euro and sterling bonds, which make up 95 per cent of the market.

“Alasdair and the investment-grade team have a proven track record of generating positive excess returns over one, three and five years in regional portfolios. We see tremendous potential to generate alpha for our clients through a flexible approach with less geographic constraints than regional portfolios.”

Adviser view

Dave Penny, managing director of Somerset-based Invest Southwest, said: “While one can see the rationale in a low-yield environment of seeking better yields overseas through global corporate debt, one must bear in mind that this traditionally low risk asset class will be complicated by currency risk, political risk and the use of instruments including derivatives.

“There is a real danger of what is perceived to be an unexciting asset class becoming something where the expected yields could still be quite low but more than offset by currency risk alone. Used intelligently and with care within specific limits, I can see this having a place in a spread portfolio. But we would be unlikely to use it for one of our average clients.”

Charges

An estimated ongoing charges figure of 1.30 per cent.

Verdict

Mr Ross and Threadneedle are going to have their work cut out in an asset class that has frequently been referred to as overvalued. While there is plenty of ground for the fund manager to cover in global markets, he and his team must be at their best to find value for money.

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