The Smith & Williamson Medium-Dated Corporate Bond Fund will invest in investment grade corporate bonds that are between six and 12 years in duration. Its lead manager is Ian Kenny, with Chris Lynas, head of fixed interest, assisting him.
Kenny and Lynas are also the management team behind the firm’s £380m Short-Dated Corporate Bond Fund, launched in April 2009, that invests in investment grade bonds of less than six-year maturity.
The new Ucits fund will be built along similar lines to its short-dated equivalent investing in sterling, dollar and euro-denominated corporate bonds. It can also invest up to 20% in sterling supranational bonds and a further 10% in gilts.
At launch it will have two share classes – the A class will have an AMC of 1% and a minimum investment of £1,000; the B class will charge 0.65% as an AMC with a minimum investment of £250,000.
In due course, the B class will become the RDR-friendly share class with a waived minimum investment for fund supermarkets.
In total, the managers will work with between 50 and 75 holdings, hedging any overseas currency risk back into sterling.
Commenting on the launch, Nick Hodgson, director of marketing and sales at Smith & Williamson said: “The UK yield curve has been flattening at the short-end but is steeper between six and 12 years, presenting an opportunity for greater potential total returns alongside the greater duration risk.
Hodgson continues, describing an equally-weighted portfolio, with currently no exposure to banks or euro-denominated bonds, and any dollar exposure hedged back into sterling.
Once full FSA recognition has been granted, the fund will be Dublin-domiciled.