M&G launches floating rate high yield fund
M&G Investments has launched the M&G Global Floating Rate High Yield Fund managed by James Tomlins (pictured).
The fund was registered in Italy, Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Luxembourg, Norway, Spain, Sweden and the Netherlands.
The fund will invest primarily in the $43.9bn global high yield floating rate note (FRN) market. The aim of the fund is to provide a natural hedge against rising interest rates because they pay a variable income which is reset every three months, M&G stressed.
The M&G Global Floating Rate High Yield Fund will also offer investors an attractive level of income because it will invest predominately in FRN issuers with below-investment grade credit ratings. Investors receive a higher level of income to compensate for the higher risk associated with below-investment grade credit.
High yield FRNs are issued by a diverse group of companies across the US, Europe and emerging markets.
At launch, the M&G Global Floating Rate High Yield Fund is expected to yield between three and four per cent above Euribor, in gross terms.
James Tomlins said: “We believe that this is the first time that retail investors in the UK and Continental Europe will have access to the high yield floating rate note market through a collective fund.
“For bond investors concerned about the risk of an increase in interest rates, this fund offers a means not only to protect their savings but also to gain from rising yields.”
Tomlins added: “Many issuers of high yield FRNs are already issuers in the existing global high yield market. Consequently, we are able to leverage off our established expertise at M&G in this area. Issuers familiar to retail investors may include Vue Cinemas, Avis Budget and Wind Telecommunications.”
James Tomlins joined M&G in 2011. As well as managing the M&G Global Floating Rate High Yield Fund, he has been manager of M&G European High Yield Bond Fund since 2011 and co-manager of the M&G Global High Yield Bond Fund since 2014.