New Star International has added the strategic bond fund to its range of Dublin-domiciled Oeic funds.
The fund aims for growth and income of 5 per cent a year by investing globally in a portfolio of US-denominated Government bonds. The portfolio will contain investment-grade Government bonds rated AAA to BBB and high-yield Government bonds rated BB and below.
The majority of the investment-grade bonds will be US treasuries, but will also include US-denominated bonds issued by other countries. The non-investment grade bonds will tend to be emerging markets debt issued by Latin American and Asian governments. At least 90 per cent of the emerging markets bonds will have BBB to B-ratings.
Theo Zemek and Simon Ward will be the lead fund managers of the fund. They will take a top-down approach when selecting bonds for the portfolio, looking at interest rates, credit outlook and the supply and demand for each type of bond. Zemek joined New Star from M&G in November 2002 as head of fixed income on the strategy side. Ward was senior economist at Lombard Street Research prior to joining New Star and has 18 years' experience of financial markets.
The fund could suit investors who are looking for a modest rate of income over the long-term without taking on the higher risks of corporate bonds. Although riskier emerging markets are included in this fund's portfolio, their presence is needed to ensure the target yield is met.
According to Standard & Poor's the New Star GF Income fund is ranked 87 out of 91 funds based on £1,000 invested on a bid-to-bid basis with gross income reinvested over three years to May 12, 2003.