Kames joins short-duration push with HY fund

Kames joins short-duration push with HY fund

Kames Capital is to launch a short-dated high-yield bond fund, making it the latest of several asset managers to focus on products that can mitigate interest rate risk.

The Kames Short Dated High Yield Global Bond fund, run by Stephen Baines and David Ennett, will seek to offer risk-adjusted returns while "maintaining low interest rate and credit sensitivity".

The company described the product as a lower-risk strategy with a duration target of below two years, employing "careful" use of bonds rated CCC or lower. Charges for the product were not disclosed.

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Kames is among several fund houses to launch short duration bond funds in recent months as the spectre of interest rate risk returns to the attention of investors.

Kames fixed income specialist Adrian Hull has previously cautioned investors to "understand the limitations" of short-duration credit portfolios.

In a note distributed earlier this year, Mr Hull warned: "Short-duration credit funds will have less exposure to rates markets than their longer duration cousins, but they cannot completely remove it."

He noted that three-year Treasury notes, which the fund house described as a typical mainstay of many short-duration strategies, could suffer a capital loss of 1.5 per cent in the event of a 0.5 per cent rise in yield following a commensurate increase in US interest rates. High-yield bonds tend to be less correlated with sovereign debt than other fixed income securities, however.