The fund will be managed by Craig Veysey who has been responsible for directly invested fixed income investments at Principal since March 2009.
It will invest in a portfolio of mainly investment grade debt securities in both corporate and government bond markets and has a projected annual distribution yield expectation of 5% after expenses.
Principal said there are very specific limitations on the credit quality of the investments the fund can make and as such it expects the fund to be among the lowest risk strategic bond funds in the market.
It is designed to enable investors to meet income requirements not being met by low cash deposit rates in today’s low interest rate environment and is targeting a top quartile performance in comparison to its peers in the IMA Strategic Bond Sector.
Veysey, said: "We think our new fund is unique in the way it combines monthly income provision with investment grade bonds. It is specifically designed to provide a robust, cost effective and efficient means for our clients to gain exposure to the asset class."
The fund is expected to have approximately £40m at seed and Principal already manages about £350m of fixed income within client portfolios.
