Duo to relaunch corporate bonds in bid to increase market share for ISA season
First State Investments and Dresdner RCM Global Investors are both to relaunch corporate bond funds with radically altered mandates.
The pair are the latest fund managers to revisit bond funds in their ranges in preparation for relaunches seeking a greater Isa season market share.
Dresdner plans to relaunch the £85.8m Dresdner RCM Managed Preference & Bond Fund as a straight corporate bond fund managed by its sister company, US bonds giant Pimco.
First State is to relaunch its own £11m Corporate Bond fund, listed in the UK corporate bond sector, under manager Malcolm White, the group's head of credit and head of global fixed interest Kevin Colglazier.
Both groups are seeking flexibility in their mandates however, with Dresdner planning to allow up to 50% in high-yield stocks, allowing Pimco to seek higher returns for investors.
First State plans to have a minimum of 95% of the fund in investment grade corporate debt with a minimum of 80% of the fund in sterling-denominated credit, but will seek opportunities in the global corporate debt market. It will seek a yield of around 6% at relaunch.
The restructuring of fund ranges has become widespread among fund providers in recent months. After a massive build up in equity and bond funds during the bull market and the scramble for business during the last two-and-a-half years, group's are now seeking to shut down poorly performing and smaller funds or re-engineer mandates to address underperformance.
Other group's currently undergoing restructurings of their fund ranges include Old Mutual Asset Management, Scottish Widows, Insight and Isis.
Among the underperforming funds under review are a number of technology and telecommunications portfolios including the two technology funds offered by Edinburgh, its fund of funds, Edinburgh Portfolio, and its direct equity fund, a brief confirmed by Edinburgh's group business development director Nigel Whittingham.
Legg Mason, which is rebranding from Legg Mason Investments from Legg Mason Investors, confirms that it too has put its LeggMason Telecoms fund under review for possible closure.
Dresdner head of retail Nick Smith said: 'Corporate bond fund sales are exceeding UK equity sales at the moment, so there is a clear appetite for them. In an environment where equity markets are volatile, people want to invest in lower-risk investments and the bond area offers that.'
The repositioning of the fund would be made easier by the fact that the illiquidity of the preference shares market has led the fund to reduce its weighting in the asset class from up to 30% to less than 5% over the past two years. The relaunched fund would hold no preference shares at all.
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