fixed income assets, equities and cash will all be held in the sarasin ci income portfolio
Sarasin has launched an absolute return-style product that holds primarily fixed income assets, but also holds equities and cash.
The Guernsey-based Sarasin CI Income Portfolio takes advantage of the fact that real yields on good quality company bonds are close to their 20-year high.
However, only 70% of the portfolio will be in bonds. The remainder will be in equities 20% and cash 10%.
The equity content could, in more favourable circumstances, rise to as much as 35% subject to retaining a minimum of 60% in fixed interest.
But bonds are to form the major portion of the new income fund because the outlook for them is currently favourable in this low inflation environment.
The bond portfolio will comprise primarily sterling investment grade corporate, bank, government and asset-backed securities.
The fund will also look to exploit investment opportunities in euro and US fixed income markets and specialist fixed interest funds at appropriate times.
The fund will focus on strong investment grade names with a bias towards single-A rated bonds. Companies chosen will have sound balance sheets, strong market positions and good cash flow generation.
Those with more risk-orientated business models and aggressive financial profiles will be avoided. Additional exposure to strong BBB companies and non-rated issuers, deemed to be of investment grade quality, may at times be desirable. In times of economic uncertainty, exposure to UK and international sovereign and supranational names may be increased to reduce volatility.
According to Guy Monson, chief investment officer at Sarasin, there has been an increase in companies using the public bond market to reduce their funding costs. The low inflationary environment also provides a favourable backdrop for bonds.
Equity selection will comprise 30-50 stocks and focus on medium and large capitalisation companies that fit into a small number of long-term investment themes.
Equities will be chosen from the same universe as Sarasin's other global thematic and balanced funds EquiSar and GlobalSar.
It will be driven from its current five themes: corporate restructuring, global energy, global pricing power, e-business and efficiency, and survival of the fittest.
The investment strategy will focus on top-down analysis of long-term economic and industrial trends with research-based security selection. Convertibles will be used to augment yield while maintaining equity-style exposure.
Exposure to cash will include deposits, short-term bonds and floating rate notes.
Minimum investment is £2,500 lump sum or £100 a month. The annual management charge is 1.25%. The initial charge is 4%, including 3% commission for professional advisers.
There will be a 1% discount until 15 September on investments in the fund introduced by financial advisers.
The product has a total target return for the first year in the region of 6%-8%.
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