Union launches subordinated bonds fund
Union Investment has now launched UniInstitutional, its first fund for subordinated bonds.
Demand for subordinated bonds has increased with the current low level of interest rates, their ability to offer more regular distributions and more attractive credit spreads than senior bonds.
The globally invested institutional mutual fund will focus on European securities. The fund predominantly invests in classic subordinated bonds and hybrid Tier 1 capital of banks, as well as subordinated bonds of insurers and industrial companies.
“By investing in the bonds of more than 60 issuers in various sectors and regions, the fund mitigates the risks attaching to individual securities,” said fund manager Stefan Sauerschell.
According to Union Investment, the credit quality of financial institutions is improving thanks to increasing capital ratios and greater liquidity
All securities in UniInstitutional Euro Subordinated Bonds have an average rating of at least investment grade (BBB-) and most currency risk is hedged. Thigh-yield bonds may not make up more than 20 percent of the portfolio.