Nomura Asset Management has launched a European High Yield Bond fund.
The Nomura Funds Ireland Ucits fund, domiciled in Ireland, will be managed by Nomura Corporate
Research and Asset Management (NCRAM), which is an analyst-driven investment boutique specialising in credit investment.
Steven Rosenthal, executive director and portfolio manager with NCRAM, will lead the fund supported by a team of 12 credit analysts.
NCRAM will aim for European high yield bond market’s attractive total returns while minimising losses by identifying what it calls strong horse companies “that can carry their debt load through the economic cycle”.
The fund’s performance target is benchmark 2 per cent a year (gross) excess return benchmarked against the BOAML European Currency High Yield Constrained index (HPC0).
Mr Rosenthal said: “We believe that European high yield bonds have earned a place in an investor's tactical allocation, offering an attractive portfolio diversification opportunity marked by high risk-adjusted yields, and low default rates.
“Geopolitical risk, generally full valuations, and the expectation for a large new issue calendar in the autumn have the potential to create volatility which we can use to our advantage.
“Going forward, we remain constructive on credit fundamentals. Monetary policy and its effect on the structure of interest rates will continue to be a major focus.
“While the lack of inflation is a headwind for monetary tightening, we believe that both the Fed and European Central Bank are poised to begin removing stimulus, and that interest rates will gradually move higher.
“At this time we manage our portfolios with a duration shorter than the market overall.”
Mr Rosenthal argued that in tackling the challenge of low yields and volatile markets European high yield is one of the few places where investors can still find attractive yields.
Juliet Schooling Latter, research director at Chelsea Financial Services, questioning the timing of the launch.
She said: “It seems a strange time to be launching a European high yield bond fund - that area of fixed interest is looking quite expensive - the index is only yielding about 2 per cent (down from 6 per cent last year) so isn't really rewarding you for the risk.”