The Natixis Short Term Global High Yield Income fund invests in high yield credit bonds with an average duration of less than two years whose issuers are domiciled in the OECD countries.
The fund is a sub-fund of the Natixis International Funds (Lux) Ucits vehicle, and is aimed at both professional and non-professional investors, said the group. Short-term high yield bonds are particularly attractive in the current environment, in Natixis’s view, as historically they have proven less sensitive to interest rate rises and will be less volatile than the credit market as a whole. They also respond to the demand from clients subject to Solvency II, notably insurance companies, who are seeking investments with a limited cost of capital. Over the long term, Natixis added, short-term high yield offers lower volatility than high yield across all maturities.
The fund managers, Nolwenn Le Roux, and Vincent Marioni, employ a bottom-up selection process and a non-benchmarked active management strategy focused on bond selection without sector allocation. The fund managers are supported by Natixis Asset Management’s credit research team, which comprises 17 analysts based in Paris, London and Des Moines in the US. The research team focuses on identifying those issuers with the most robust fundamentals and offering the most compelling risk-reward characteristics. They pay particular attention to liquidity, solvency and the structure of the debt, together with the business models of the issuers. At launch the fund holds 90 positions.
Dickie Hodges, manager of the Legal & General Investments Dynamic Bond Trust, believes buying short duration bonds is just one of several options fund managers can use to hedge against the prospect of rising rates.
“There is a host of instruments available to manage the short and long-term risks inherent to bond investing. It’s too simple just to talk about buying short duration instruments. For example I have been very active in the interest rate market so far this year compared with 2013.”
Hodges said he does not expect imminent interest rate rises as relatively low wages are reducing upward pressure. “The tactical opportunity for bond buyers is now however. It’s cheaper to buy an umbrella when the sun is shining and it is more effective to buy protection against rising rates now than when they actually start to move and volatility picks up.”
