Ignis is eyeing the launch of its first internal retail fund since 2007 with an absolute return bond mandate for its rates team.
The fund, which will be based on an existing institutional product, uses a methodology devised by Russ Oxley, the group’s head of rates. Oxley will run the product with Stuart Thomson, Ignis’ chief economist and member of the rates team.
According to Thomson, the process breaks down the yield curve into discrete one-year forward rates, giving a different picture when compared to simply analysing the yield curve.
“We do not just look at a 10-year gilt as a 10-year bond. We look at it as if it is a series of 21 cashflows in terms of coupons and the principle rebate at the end,” Thomson says.
“We then take bets on the portfolio where we want to emphasise certain cashflows and de-emphasise others.
“The forward rates approach enables us to isolate the periods of time we want to exploit much more efficiently.”
This process, which was built internally using custom-made systems, was first introduced into portfolios in 2005. The Ignis rates team currently manages over £9bn in gilt investments.
The new absolute return fund is planned for launch in the next few quarters, subject to regulatory approval. It is poised to be sterling-denominated, but is able to invest on a global scale. The fund will fit into a Ucits umbrella and be domiciled in Dublin.
It will be first internal vehicle for Ignis since it launched the European Smaller Companies fund to the market in November 2007. The group is aiming to build on its internal proposition, after spending a number of years developing strategies with its joint venture partners.
Risk to retail investors
Joined as head of strategy, multi asset, in June
Group income protection