The fund aims for a total return, comprising income and growth, by investing mainly in bonds that are below investment grade.
The fund is co-managed by head of European high yield Steve Logan and investment director Lesley O’Neill, who have worked together for over eight years.
Logan joined Swip in 2001. He was previously a credit analyst at Standard Life Investments and has held similar positions with Sumitomo Trust & Banking Co and Hill Samuel Bank. O’Neill also joined Swip in 2001 and was previously a graduate trainee at Murray Johnstone.
Logan and O’Neill will fill the new fund with around 75 of their best ideas, with the portfolio being unconstrained by a benchmark. As a European fund, the geographical focus will be Europe but the fund also has the ability to use the best idea from Swip’s New York based US high yield team.
Swip believes the European high yield asset class will show strong growth over the long term driven by companies issuing bonds to gain long-term capital instead of going to the banks. The firm sees the asset class as attractive to investors as a diversified source of return and potential high income. As a recession has already been priced, the high quality end of the market looks cheap, with prices more attractive than investment-grade bonds and equities.
Companies that have survived the turbulent market conditions of the last few years are seen as in good shape and unlikely to default. Not all investors may be tempted to this part of the market given the continuing uncertainty surrounding the Eurozone debt problems, but the potential to benefit from long-term market improvements may attract some to this fund.