Co-managers Christine Johnson and Bastian Wagner said the Dublin domiciled fund was fully invested at launch on 26 September, with a portfolio of around 85 high-conviction stocks. Plans to launch the product were first announced in May.
Johnson explained that the investment world is getting more complicated, with variable liquidity and extremely low cash returns, but the needs of investors have not changed.
“Investors still want income, capital preservation, lower volatility, but set against this backdrop of a more complicated investment landscape. So to produce the same results – what investors need – you need to employ something more sophisticated than the old fashion bond portfolio.”
In order to provide this, she added, there are three main drivers behind the Old Mutual fund. First, high conviction stock picking – the fund allocates at least 2%-3% to each investment.
On the “liquidity side” Johnson explained, while the fund is called a “high yield fund” it is able to move up the seniority scale to investment grade. But, perhaps more importantly, Johnson said it is about ensuring you can substantially change duration. The fund therefore has duration range which runs from -3 to +9.5 years.
“Exciting high growth sectors”
The fund targets a 6% annual yield, paid monthly, and is looking to achieve this through investment in what the managers describe as the “exciting middle market” – companies issuing debt worth between €150m to €300m.
Co-manager Bastian said there are significant opportunities in exciting, high growth sectors where lenders, due to a number of reasons, not least increased regulation, have stopped or have cut down lending.
One example is Bibby Offshore, a well-established Aberdeen headquartered company which has provided equipment to the oil & gas sector since the 1980s. Bastian explained the company was historically provided with lending from three UK banks which all cut lines of credit due to increased regulation. The bond yields 7.2% and the company is likely to IPO in the short term.
Bastian added the fund is able to take advantage of stocks like these where others can’t, in part because of its nimble size.
