Launched on 18 December, it is benchmarked against the iBoxx Euro Corporate BBB index and invests primarily in corporate and government euro-denominated bonds.
Patrick Vogel, head of European credit at Schroders and lead manager on the fund, said: “As the eurozone economies move into a stabilisation phase, providing a more supportive environment for credit, we are seeing a ‘sweet spot’ for European credit with opportunities across the investment space, particularly in higher yielding investment grade bonds.”
Outperforming the index
Even when this stabilisation phase draws to a close, perhaps two years down the line, Vogel said the aim will remain to outperform the index.
“At the moment investors see emerging markets facing a difficult time. Currently we’re at a sweet spot for [European] credit investors that look at downside risk, although it’s something that’s starting to be priced in and I don’t expect buoyant growth in many parts of Europe.
"What is different this time is there is much more differentiation in terms of where the spread is. Our conviction is used to pick the higher yielding bonds. We don’t just want the high risk ones but the risky bonds we’ve researched well and understand well.”
Top-down and bottom-up
The investment process utilises both top-down and bottom-up proprietary research and investment themes from across Schroders’ investment teams to formulate diversified credit investment themes, which the team believes will have an influence on European credit markets.
Once themes have been identified, credit analysts then undertake in-depth research to identify which companies they expect to benefit as these themes play out.
Vogel said many of his competitors have quite a lot of their portfolios concentrated in subordinated financials.
“I think this is too narrow. There might be other opportunities outside the financials space that give us better diversification. We’re aiming to have a wider opportunity set than just one area of the market.”
