Standard Life Investments (SLI) has launched a short duration corporate bond fund making it the second firm this week to attempt to woo risk-averse investors.
The strategy, which can be used as a slightly risky alternative to cash due to strong liquidity, has seen a boom since the summer, with SLI joining Morgan Stanley Investment Management, Aberdeen Asset Management, Axa Investment Managers, Royal London Asset Management and Canada Life Investments in launching short duration products.
Said funds tend to buy instruments with duration exposure between one and five years, and have become popular as longer duration bonds experienced more volatility. This began with a flattening of the long-end of the yield curve in several economies making the risk and return trade-off for the less-liquid securities harder to stomach.
The SLI Short-Dated Corporate Bond fund will be managed by head of sterling investment grade credit, Daniel McKernan. The firm said it aims to "address the potential for significant drawdown" in the fixed income market by holding sterling-based bonds with maturity of less than five years.
It will have a retail annual management charge of 1 per cent.
Mr McKernan said: “With macro uncertainty increasing and evidence that we are drawing towards the end of the credit cycle, we would expect to see an increase in volatility in both government and credit markets.
"While short-dated corporate bonds are not immune to any increase in market volatility, we believe that they offer an excellent risk-adjusted option for investors”.
