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Invesco focuses on yield initially for tactical bond fund

Invesco Perpetual is developing its closed and open-ended fund ranges with a strategic bond fund and possible changes to its forthcoming split-capital trust.

The company will launch a tactical bond fund for fixed-income co-heads Paul Causer and Paul Read on February 1.

The fund will adopt an unconstrained strategy, allowing it to invest across the whole fixed-income spectrum.

The managers will be able to make short-term asset allocation calls, which theoretically could include holding 100 per cent in cash, making the fund’s risk profile subject to sudden change.

Plans for the fund were first revealed in Money Marketing last November.

Product director Lewis AubreyJohnson says, at launch, the portfolio will be skewed towards high yield. He says: “We think it is right to remain invested in credit, pursuing higher-yielding opportunities, for example, in the financials sector. We remain cautious on government bonds.”

The fund aims for a total return and does not have an income target. It will be positioned in the Investment Management Association strategic bond sector.

Skerritt Consultants head of investments Andy Merricks says: “You have to pay serious attention as these are big names with great track records. I think on this occasions we may hold off to begin with as the pair will hold a big cash weighting initially which will effect the yield we are searching for from these types of funds.”

Invesco Perpetual is considering adding tactical gearing to its upcoming dualreturn split-capital trust.

In the original proposals, the trust, which will be managed by Martin Walker, would have no bank debt. However, sales director, specialist funds, Andrew Watkins says that market movements may affect these plans.

He says: “Conditions have changed a bit since we last spoke to potential investors, with the market up by 10 per cent and yields down by the same amount, so I need to establish if they are still likely to support a new issue.

“This is why I will raise the issue of short-term, tactical gearing. The company could borrow on fully flexible, variable-rate overdraft terms at 100 basis points over the base rate so, at the moment, 1.5 per cent total cost. It would makes sense to do so, at least for the shorter term while interest costs are so low, partly to benefit capital growth and also to give the yield a bit of a boost.

“We should know if we are to proceed, and with which option, by the first week in February.”

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