The Royal London Short Duration Gilt fund , the Royal London Short Duration Credit fund and the Royal London Short Duration Global Index Linked fund will launch on 7 October. The funds will be structured as UK-domiciled OEICs and will be sub-funds of the Royal London Bond Funds ICVC umbrella.
The Royal London Short Duration Gilt fund will be managed by Craig Inches. The fund will have an active duration strategy to exploit opportunities in short-dated yields, and will also be able to invest tactically in assets such as index-linked government bonds, corporate bonds, or non-UK government bonds depending on where Inches sees value.
The Royal London Short Duration Global Index Linked fund will be managed by George Henderson. The fund will target the shorter end of the maturity spectrum, aiming to combine inflation protection with limited interest rate risk.
The Royal London Short Duration Credit fund will be managed by Paola Binns. The fund will target investment grade corporate bonds of up to 10 years maturity. Fund duration and tactical allocation to other asset classes such as gilts and index linked bonds will be actively managed.
The group already has some existing short duration funds: It launches the Royal London Duration Hedged Credit fund in September 2012, and the Royal London Short Duration Global High Yield fund in February 2013.
Demand for shorter-duration funds has increased as investors become increasingly concerned about the prospect of rising interest rates. The most recent fund flows onto the Skandia platform showed gilt funds continuing their steady decline and corporate bond outflows accelerating during August. In contrast, sterling strategic bond flows remained strong.
The group said this showed: “Investors (moving) away from longer duration products in fixed income to funds with a more flexible approach to navigate the bond markets as talk of QE tapering continues.”
