Fidelity launches global high yield fund for Spreadbury

Fidelity Worldwide Investment has expanded its bond fund range with the launch of a global high yield fund for managers Ian Spreadbury and Peter Khan.

The Fidelity Global High Yield fund, launching in March, is an unconstrained portfolio of 150 securities, primarily made up of sub-investment grade BB or B-rated credits.

Khan, formerly a fixed income trader, and Spreadbury (pictured) also have the flexibility to invest in CCC-rated securities, although the focus will be on more highly-rated  securities.

Bonds close to home that fall into their investment universe include the Daily Mail and General Trust’s senior unsecured debt.

The group is launching the fund, a UK-domiciled Open Ended Investment Company sitting in the Investment Management Association Sterling High Yield sector, to take advantage of the wide dispersion in the high yield space, as signs of deterioration in the creditworthiness of some issuers increases.

Khan said: “Banks’ limited appeal to roll over loans is likely to continue, encouraging more companies to seek funding in the bond market.

“The move away from loans into high yield bonds has been a major trend in the last three years and it is expected to continue, especially throughout Europe.”

The income paid out by the sub-investment grade bond universe is around 8%, and Khan, lead manager on the fund, said low interest rates should support the high yield market as investors look for additonal income.

“Assuming the economy avoids recession, it should foster strong demand for higher yielding products and good, but volatile, new issuance conditons,” he said.

The fund, which will be competing against established offerings such as M&G’s £1.1bn High Yield Corporate Bond fund, will be hedged back to sterling to eliminate currency risk, while it may also use derivatives.

The launch is subject to regulatory approval by the UK Financial Services Authority.


This article was first published on Investment Week

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