This is a new departure for the discretionary manager, enhancing its discretionary service to existing and new clients by providing better access to its best Fixed Interest ideas.
The new fund is designed to take a cautious approach, combining the potential for capital growth with an attractive level of income that can be received monthly.
It invests in a portfolio of mainly investment grade debt securities, in corporate bond and government bond markets. The fund's projected annual Distribution Yield at launch is expected to be above 5% (after expenses).
There are very specific limitations on the credit quality of the investments the Fund can make. As a result, the new Fund should be among the lowest risk strategic bond funds in the market, and enable investors to meet income requirements that are not being met by current low cash deposit rates. It will bring enhanced investment returns, and also provide valuable diversification benefits when combined in a portfolio with other asset classes, such as equities and property.
Craig Veysey CFA, who has been responsible for Directly Invested Fixed Income investments at Principal since March 2009, is fund manager of the new fund.
Craig commented:
“We think our new fund is unique in the way it combines monthly income provision with Investment Grade Bonds. It is specifically designed to provide a robust, cost effective and efficient means for our clients to gain exposure to the asset class. The Investment Grade focus of the Fund underpins the Fund’s conservative approach within the strategic bond sector and Principal’s commitment to investing in higher quality securities for its clients.
We will actively seek strategic opportunities in corporate and government bonds both in the UK and overseas, including emerging markets. The Fund will target a top quartile performance versus the IMA Sterling Strategic Bond sector.”
Stephen Jones, Chief Investment Officer at Principal, said:
“Our primary objective in launching the Bond Fund is to enhance the service for our clients. The fund will improve risk control, reduce pricing spreads, and increase the investable universe. This is a further demonstration of the excellence in the investment solutions we offer to our clients.
“Craig has had a very strong track record since his arrival at Principal, and we have recently reinforced his team. Principal’s bond investment strategy has produced stronger performance, with lower volatility, than the IMA Sterling Strategic Bond sector. In the team, we have experience and talent that we believe will deliver strong returns.”
The fund was launched yesterday, and is expected to have approximately £40m invested at the outset. Principal already manages about £350 million of fixed income in client portfolios, and the new Fund is expected to develop this significantly. As the fund is ISA-able, it is available to all Principal Clients.
