Objective and investment policy
The fund aims to provide a competitive global high yield bond market exposure whilst limiting interest rate risk. Fund performance is measured against a global high yield composite index over any five-year period.
The composite index is 2/3 the Markit CDX North American High Yield 5Y Excess Return Index and 1/3 of the Markit iTraxx Europe Crossover 5Y Excess Return Index and Overnight LIBOR.
Investment policy and strategy
Core investment: At least 70% of the fund is invested in floating rate high yield bonds. The exposure to floating rate high yield bonds is typically gained indirectly via derivatives (high yield credit default swaps) combined with government floating rate bonds from anywhere in the world, or cash.
Between 70% and 130% of the fund is exposed to the high yield bond market, by investing directly or indirectly via derivatives. The fund’s neutral geographical asset allocation is 2/3 North America and 1/3 Europe.
The fund typically invests in assets denominated in US dollar or in other currencies hedged back to US dollar.
Other investments: The fund may invest in other debt securities (including government bonds), other funds and cash or assets that can be turned quickly into cash.
Derivatives: The fund invests via derivatives and may also use derivatives to reduce the risks and costs of managing the fund.
Strategy in brief: The fund is globally diversified and seeks to provide exposure to a broad range of high yield bond issuers across different sectors. The investment manager has the flexibility to adjust the fund’s credit exposure and regional allocation based on an assessment of current market valuations and the macroeconomic environment, including the likely path of economic growth, inflation and interest rates.
Benchmark: A composite index made up of the following indices is a point of reference against which the performance of the fund may be measured:
• 2/3 Markit CDX North American High Yield 5Y Excess Return Index
• 1/3 Markit iTraxx Europe Crossover 5Y Excess Return Index and Overnight LIBOR
The benchmark is a comparator against which the fund’s performance can be measured.
The composite index has been chosen as the fund’s benchmark as it best reflects the scope of the fund’s investment policy. The benchmark is used solely to measure the fund’s performance and does not constrain the fund's portfolio construction.
The fund is actively managed.The investment manager has complete freedom in choosing which investments to buy, hold and sell in the fund. The fund’s holdings may deviate significantly from the benchmark’s constituents.
For unhedged and currency hedged share classes, the benchmark is shown in the share class currency.
You can find more information about the objective and investment policy of the fund in the Prospectus.
Risks associated with the fund
The value and income from the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise. There is no guarantee that the fund will achieve its objective and you may get back less than you originally invested.
The fund may use derivatives to profit from an expected rise or fall in the value of an asset. Should the asset’s value vary in an unexpected way, the fund will incur a loss. The fund’s use of derivatives may be extensive and exceed the value of its assets (leverage). This has the effect of magnifying the size of losses and gains, resulting in greater fluctuations in the value of the fund.
Investments in bonds are affected by interest rates, inflation and credit ratings. It is possible that bond issuers will not pay interest or return the capital. All of these events can reduce the value of bonds held by the fund.
High yield bonds usually carry greater risk that the bond issuers may not be able to pay interest or return the capital.
The hedging process seeks to minimise, but cannot eliminate, the effect of movements in exchange rates on the performance of the hedged share class. Hedging also limits the ability to gain from favourable movements in exchange rates.
In exceptional circumstances where assets cannot be fairly valued, or have to be sold at a large discount to raise cash, we may temporarily suspend the fund in the best interest of all investors.
The fund could lose money if a counterparty with which it does business becomes unwilling or unable to repay money owed to the fund.
Further details of the risks that apply to the fund can be found in the fund's Prospectus.
The Fund allows for the extensive use of derivatives.
The performance webpage for this fund is currently being reconfigured.