Old Mutual's corporate bond fund is a unit trust that will invest purely in corporate bonds.
The fund is aimed at risk averse clients who are looking for steady income and will offer a yield of 6.7 per cent. At least 80 per cent of the fund will be invested in investment grade bonds with a credit rating of BBB or above at all times. This means the bond has a secure credit rating and should minimize the risk for the investor.
Old Mutual believes that inflation in Britain has been brought under control and that interest rates will peak this year making it a good time to introduce the product. Also the supply of gilts from the government is drying up, forcing investors to look elsewhere.
According to Standard & Poor's Micropal the Old Mutual worldwide bond fund is ranked 10 out of 33 funds, based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to June 19, 2000.