Jeff Boswell and Garland Hansmann will co-manage the Investec Global Total Return Credit fund, which launched on Friday and sits in the Investment Association’s Sterling Strategic Bond sector.
Boswell and Hansmann, who joined Investec from Intermediate Capital Group in 2015, already manage the Sicav fund, which launched in June 2017.
Investment strategy
The Global Total Return Credit fund will invest in global high yield, emerging markets and structured debt, special credit (including synthetics, hybrid debt and banks) and short-duration fixed income, including floating rate notes.
It launches with £14m ($19m, €15.9m) seeding funding from JLT. The annual management charge will be 0.75%, although seed investors on the first £250m will be able to access the fund for 0.45%.
Over the full credit cycle, the fund will target returns of three-month GBP Libor plus in excess of 4% gross of fees. Expected volatility is between 5-7% per year.
Despite being the most popular asset classes for retail investors in 2017, traditional fixed income is failing to deliver meaningful returns, said David Aird, managing director for Investec’s UK client group.
Aird told our sister publication Portfolio Adviser the Oeic could attract inflows at a faster rate than the Sicav version of the fund.
“The demand we have identified for the Oeic just in the UK means we expect it will grow quite quickly. I think in the first year we would be through £100m quite quickly.”
In the almost 12 months since launch, the Sicav has accumulated $73.5m in assets, although Aird said it is still “incubating its track record”.
He added the Oeic launch is not connected to Brexit.
Last week, Columbia Threadneedle announced it was preparing to launch 13 Sicav alternatives to Oeics for clients in the European Union. AllianceBerstein has said it will look to launch an Oeic range for UK clients depending on the outcome of negotiations between the UK and the EU.
Investec currently offers 29 products through its Oeic range and 49 products through its Sicav range.
Interest rate sensitivity
Aird said even small, incremental interest rate rises will hit clients’ capital as the Bank of England follows in the footsteps of the US Federal Reserve to hike interest rates.
Duration is increasingly becoming a concern for investors, particularly as governments issue low coupon, long-dated debt to take advantage of cheap debt.
Aird said Investec is seeking to attract outflows from gilts, UK corporate bond funds and rival sterling strategic bond funds.
“We don’t see this as a strategic bond fund. Most strategic bond funds benchmark themselves against the benchmark, we’re completely benchmark agnostic.”
Duration on the fund at launch is approximately 3.5 years.
Aird said the fund is broken down into three camps: defensives, such as Anheuser-Busch InBev and Amazon; issuers with upside potential, including Sprint and Tesco; and thematic allocations, such financial names, like Goldman Sachs and Citi Group, or commodities, where it has exposure to Petrobas to exploit the oil price rally.
The portfolio will hold 80-120 securities.
Hansmann said: “In a world of rising interest rates, and with the accompanying increase in volatility, our diversification and nimble investment approach allows us to capitalise on a broad global credit opportunity set.”
