The Skandia Investment Grade Corporate Bond Fund aims to take advantage of the opportunities created by wide investment grade spreads; issuers focusing on the repair of balance sheets in light of economic decline; Government action to support strategic companies; strong demand from corporate pension liability hedging and retail investors seeing higher yields.
SIG has awarded the mandate to run the fund to US-based institutional fund manager Wellington Management Company.
The fund will seek to make excess returns over a global credit index by investing primarily in investment grade corporate bonds.
The investment manager has the flexibility to use other debt instruments, such as mortgage-backed securities, convertible bonds, high yield bonds among others, although such flexibility is not expected to account for more than 30% of the portfolio.
The fund will be benchmarked to the Barclays Capital Global Aggregate Corporate Index Hedged to the dollar. Currency risk is primarily hedged to the share class currency, although the manager may unhedge partially at their discretion when they see an investment opportunity.
The fund will be available in dollar, euro, sterling and Swedish krona hedged share classes.
The minimum investment on the euro hedge share class is $1,000 with an annual mangement charge of 1%. For the institutional share class the minimum investment is $5m with an AMC of 0.5%.
Head of fixed interest research, Adam Smears, said investment grade corporate bonds still offered good value, as corporate bond spreads were wider than historical averages. “Wellington has a good track record of generating outperformance even through the 2008 credit crisis. In a low-yield environment, this is a strong alternative to a straight government bond portfolio," he added.
