The fund will aim for a target income yield of 7.5 per cent a year with the potential for capital growth by investing in fixed-interest, variable rate and index-linked securities issued by companies, governments and government agencies in the UK and overseas.
It will be managed by Aberdeen Asset Managers Paul Reed who has over 30 years experience in fixed-interest. Reed joined Aberdeen in 1991 and managed Aberdeens fixed interest unit trust, which was taken over by New Star. He has also worked for Friends Provident and the Merchant Navy Officers Pension Fund.
The global outlook for bonds is better than expected as corporate earnings are improving, rising interest rates in some regions have had less of an impact than expected and default rates are falling. Marlborough feels high yield bonds are the most attractive area of the UK market because interest rate rises have had a lower impact on yields compared with investment grade bonds and gilts. In addition, the company hopes to take advantage of a flurry of new issues.
High yield bonds have recently outperformed and may be a good short-term bet. However, valuations may start to look unattractive and investors may feel the returns do not adequately compensate them for the extra risk they are taking relative to investment-grade bonds. The success of this fund will depend on Reeds ability to identify attractively-priced bonds which still have room for further growth.
According to Standard & Poors the Marlborough global bond fund is ranked 14th out of 25 funds based on 1,000 invested on a bid-to-bid basis with net income reinvested over three years to November 1, 2004.