Schroder Investment Management has launched the Schroder ISF Global Corporate Bond Fund in Singapore.
The fund aims to provide a return of capital growth and income primarily through investment in a portfolio of bonds and other fixed and floating rate securities denominated in various currencies and issued by governments, government agencies, supra-national and corporate issuers worldwide.
Albert Tse, head of retail distribution at Schroders in Singapore, says a corporate bond fund will work well if managers are able to pick the survivors and not the defaulters.
"It is not going to be a one-way ride for every bond. The difference in performance between the 50 best performing and the 50 worst performing bonds will be huge over the next two years as the market decides who will survive and who will default," he says.
Corporate bonds are among the favoured investments of fund managers seeking refuge from volatile equities markets. Corporate bonds look cheap as the difference in yield between corporate bonds and government bonds -- the credit spread -- is at historic highs. And now that spreads are at historic highs, investors including pension funds, insurance companies, and private bankers are looking at buying the asset class.
The fund will be managed by Schroders' global fixed-income team, which is made up of more than 100 fixed-income specialists, including a dedicated credit research team of 11 credit portfolio managers, 26 credit analysts and four quantitative analysts.
Originally launched by Schoders in other markets in 1994 (but not available to retail investors in Singapore until now), the $70-million fund has an initial fee of 5% and an annual management fee of 0.75%. Since launch to end-January, the fund was up 34.1%, but its benchmark Barclays Capital Global Aggregate -- Credit Component performed better at 39.5%. In the month of January, both the fund and the benchmark were down 0.3%.
The bulk of the fund was invested in US (43%) and UK (38%) corporate bonds in January.