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Allianz Dresdner takes conservative approach to bond fund

Allianz Dresdner Asset Management has established the high income bond, an Oeic that will be managed by its sister company, Pimco.

The fund has an estimated target yield of 5 per cent a year and will invest in a mixture of high-yield and investment-grade corporate bonds, mainly in the UK. However, up to 30 per cent of the portfolio may be invested internationally and each individual holding will not represent more than 5 per cent of the portfolio.

Up to 50 per cent of the portfolio can be held in high-yield bonds, but the weighting is more likely to be between 15 per cent and 35 per cent. The remainder will consist of investment-grade bonds.

When selecting bonds the lead fund manager, James Stuttard, will draw on research provided by a team of credit analysts. He will also be guided by themes that emerge from the company&#39s annual selector forum, which brings Pimco managers together with economists, financial analysts and politicians.

The fund is limited in its weighting of high-yield bonds because capital preservation is given priority over high headline returns. To achieve returns higher than 5 per cent, the fund would need to increase its high-yield weighting, but this would also increase the risk.

The fund could suit cautious investors seeking income who are looking for a haven from volatile equity markets. Although Investment Management Association statistics show bond funds are currently a popular choice among Isa investors, 50 per cent of investors recently surveyed by Invesco Perpetual did not know the difference between corporate bonds and equities.

The Allianz Dresdner UK corporate bond fund is ranked 76 out of 77 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over six months to March 28, 2003.

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