by Rob Hosking
The new funds are the Enhanced Yield Fund (EYF) and the Credit Opportunities Fund (COF).
“We’re aiming at people looking for something in New Zealand fixed interest space as opposed to global, and obviously wanting something which would outperform bank deposits.” The targeted return for the EYF is 0.5% over the 90-day rate after fees.
The interest rate exposure is floating, so there are no capital losses if interest rates increases, and any international exposure is fully hedged to New Zealand dollars.
The main types of income securities are corporate bonds, capital notes, banknotes, hybrid securities, asset backed securities and mortgages. Some of these, particularly corporate bonds, are not normally easily available to retail investors, says Michl.
“Corporate bonds have outperformed cash, for those who are prepared to take a medium risk there is a good reason to invest in corporate bond market.
"And high yield bonds have often been outperformed by higher quality corporate bonds.”
Like the recently launched Absolute Capital PINS fund, the COF is designed as a domestic credit fund, but one which will primarily invest in global credit funds – or credit opportunity funds (COFs).
The breakdown will be about 30% in collateralised debt obligations (CDOs), 10% in cash equivalent securities with the remaining 60% in credit opportunity funds. “It’s only been a couple of years since we have heard a lot about CDOs but COFs are not a lot different – there are though some subtleties which change the risk profile. And we really didn’t want it to end up another CDO fund,” ING head of structured credit David Jansen says. The new funds are a follow on from the Diversified Yield Fund which is now closed and the Regular Income Fund.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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