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Diversity pays for MPC convertibles

MPC Investors says its global convertibles fund has seen a lot of support from multi-managers, particularly since management groups have been launching multi-asset and total return portfolios.

The fund aims to produce 3 per cent above cash by investing in global convertible bonds that generate a higher return than conventional bonds but with a lower risk than equities.

It aims to provide returns throughout the market cycle, with the convertibles paying a regular fixed income over a set number of years. When the convertibles mature, the initial capital is repaid like a conventional bond or converted into shares at a predetermined price.

MPC Investors says multi-managers, including Williams de Broe and Premier, have invested in its global convertibles fund because they want diversity and conservative equity exposure.

Multi-managers do not have many FSA-recognised convertible bond funds to choose from and, unlike the MPC fund, some do not hedge returns back into sterling, potentially exposing investors to currency risk.

MPC Investors says many funds targeting total returns have disappointed in the current environment as many of the risk models have broken down over concerns about the US sub-prime crisis and its impact on the markets.

MPC Investors head of sales Dan Mannix says the MPC global convertible fund was down by 0.2 per cent over the difficult period during August, which he believes is reasonably strong.

He says: “Global convertibles are correlated to equities but do offer diversity. As multi-asset and total-ret-urn funds have been launched, they have needed to expand into diverse and uncorrelated asset classes.

“We find that fund of funds managers in Europe buy the global convertibles and our strategic reserve fund because they buy a basket of total return funds while managers in the UK look at regions.”

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