The fund will invest in a portfolio of short-term, low volatility high yield debt with an expected average maturity of between 12 and 24 months. The firm’s intention is to register it in the major European countries.
The limited term strategy aims to capitalise on pre-existing, structural inefficiencies in the market as well as reducing credit and interest rate risk.
UPDATE – fund facts:
- Institutional class: $300,000 minimum investable;
- Retail class: $10,000 minimum investable;
- Available in hedged shares classes for all major global currencies;
- Authorised Ucits;
- Domiciled in Dublin; registered in (or in process) in most major European markets including UK, France, Spain, Germany, Netherlands, Switzerland, and Sweden;
- No target yield, but current yield for limited term duration high yield is around 6.5%.
- Fund manager will be be Larry Post, the founder of Post Advisory, and Jeremy Sagi
Explaining why he sees opportunities available now, Larry Post, chief investment officer at Post Advisory, says: “We estimate that only 2-3% of high yield managers specialise in limited term, so there is a dearth of expertise in this area. With most market participants reaching for absolute yield, the limited term segment has been systematically undervalued.”
Post Advisory, a 19-year-old affiliate of Principal Global Investors, launched its limited term high yield strategy in February 2002, focusing on the short duration investments already in the high yield and high yield plus portfolios.
Commenting on the fund launch, Nick Lyster, chief executive at Principal Global Investors (Europe), says: “This fund addresses a fundamental and timely market need: with a rise in interest rates looking likely, limited duration bonds become more attractive as they are less sensitive to destabilising market movements.”