Ethical Investing  

EdenTree launches short-dated bond fund

EdenTree launches short-dated bond fund

Socially responsible fund manager EdenTree has launched a short-dated bond fund.

The Amity fund, which has an explicit ethical and SRI focus, will invest in investment grade bonds with average credit ratings of A or better and will focus on bonds with durations of an average of two years and no more than three.

It will be managed by David Katimbo-Mugwanya and Chris Hiorns.

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Mr Katimbo-Mugwanya said the fund was aimed at investors who were struggling to get a yield from cash.

“By investing in high-quality, short-dated bonds, investors can gain exposure to the pickup from credit spreads, and therefore a higher yield, without building material exposure to duration,” he said.

“We believe duration risk is not adequately compensated by the market in what is a very extended cycle – particularly as investors become increasingly concerned by suppressed volatility. It is time for investors to build a defence."

An ethical screen is applied to the fund, meaning certain industries are excluded and businesses with more socially responsible practices are favoured.

Short-dated bond funds are growing in popularity, with Kames and Axa recently launching products.

Stephen Baines, manager of the Kames fund, which launched in June, said at the time that in periods of deteriorating credit risk and rising government bond yields, "short-dated high yield bonds have shown greater price resilience than the broader high yield bond market".

Scott Gallacher, from Rowley Turton, said that while he was not keen on fixed interest in general,  where a client has to have it "short dated is better".

"It is quasi-cash so the rates aren't great, but it does what it needs to," he said.

He added that there was little appetite from his clients for ethical funds, though he had "done one or two".

rosie.murraywest@ft.com