Fidelity launches short-dated fund for Spreadbury

Fidelity launches short-dated fund for Spreadbury

Fidelity International has become the latest firm to launch a short-duration bond fund as the appetite for the strategy continues to grow in strength.

The increasing bearish attitude towards rate risk and the growing need for a liquid and yielding alternatives to cash has seen demand for short-duration bonds spike in recent months.

As a result, Fidelity has become the last fund house to launch a product, joining the likes of Axa Investment Managers, Aberdeen, Royal London Asset Management, Morgan Stanley and Standard Life Investments.

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Fixed income duo Sajiv Vaid and Ian Spreadbury will manager the new Fidelity Short Dated Corporate Bond fund, adding to their combined responsibilities on the Fidelity MoneyBuilder Income and Extra Income funds.

The strategy will focus on sterling-denominated, or hedged back to sterling, investment grade corporate bonds with a maximum maturity of five years, with an ongoing charge figure of 0.38 per cent.

Mr Vaid said that, despite a yield dilemma presented by low interest rates, investors do not need to take excess risk to meet return goals. 

“While we think yields will remain low in a historical context – given a fundamental backdrop characterised by high debt, elevated political risk and low nominal growth – this fund caters to those investors with a cautious outlook,” Mr Vaid said.

Fidelity’s head of wholesale John Clougherty said the firm launched the product to meet demand from clients for low volatility products with a moderate level of income.

“This fund is a natural extension to our fixed income product suite in the UK and will aim to deliver the three core attributes we look for; a consistent level of income, low volatility and equity diversification.”

Fund buyers said the increasing demand for such strategies warranted the spike in launches seen in 2016, with asset managers without an offering likely to see sustained outflows.