This fund aims for income and growth to provide a total return of 2.5 per cent above the iBoxx non-gilts index. It will invest in bonds, some equities and derivatives such as contracts for difference.
RLAM head of credit Eric Holt –manager of the RLAM Sterling Extra High Yield Bond fund – and head of derivatives Paul Doran will jointly manage the fund.
The best ideas of RLAM’s fixed incone team will be combined with the performance enhancing and risk control qualities of derivatives. RLAM sees this as opening up a management style that institutions have enjoyed for years to retail investors.
According to RLAM, the new COLL regulations, with the option to run Ucits III or non-Ucits portfolios open up opportunities within the retail market for funds that have wider investment powers.. Examples include the ability to use derivatives to achieve the same effect as when a hedge fund manager shorts the market, or investing in equities to exploit arbitrage opportunities. Arbitrage opportunities may occur where the dividend yield on a company’s equity issue is more attractive than that company’s bond yield.
Unlike traditional bond funds, this can move across a range of fixed income assets and can control interest rate or inflation risk through derivatives.
RLAM’s strength is in the fixed income market so it is logical to have an absolute return bond fund in its range.. This approach gives the fund manager the chance to manage their way out of difficult periods, but it does not necessarily mean the funds will outperform. Outperformance will still depend on the fund manager using the tools available in the right way at the right time.