The fund aims to provide a combination of capital growth and income to deliver a return that is higher than that of the global floating rate high yield bond market over any five-year period.
Investment policy and strategy
Core investment: At least 70% of the fund is invested in high yield floating rate notes (FRNs) issued by companies or governments from anywhere in the world and denominated in any currency. The FRNs are held directly and indirectly via derivatives combined with physical bonds. The fund also invests in asset-backed securities. The fund aims to hedge any non-US dollar assets back to US dollar.
Other investments: The fund may invest in cash or assets that can be turned quickly into cash.
Derivatives: The fund invests via derivatives and may use derivatives to reduce the risks and costs of managing the fund.
Strategy in brief: The fund is designed to provide income while minimising the negative impact of rising interest rates by investing mainly in FRNs. The fund focuses on bonds issued by companies with below investment grade credit ratings, which typically pay higher levels of interest to compensate investors for the greater risk of default. The investment process of the fund is based on the bottom-up analysis of individual bond issues whilst remaining aware of macroeconomics developments. Spreading investments across issuers, industries and countries is an essential element of the fund’s strategy and the investment manager is assisted in the selection of individual bonds by an in-house team of credit analysts.
Benchmark: BofA Merrill Lynch Global Floating Rate High Yield Index (3% constrained) USD Hedged Index
The benchmark is a comparator against which the fund’s performance can be measured. The 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.
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 fund is exposed to different currencies. Derivatives are used to minimise, but may not always eliminate, the impact of movements in currency exchange rates.
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.