Aegon Asset Management has launched a financial credit fund for head of UK fixed income Iain Buckle and investment manager Alex Pelteshki.
The Aegon Financial Credit Opportunities fund aims to provide a steady source of income with the potential for capital growth by investing in capital securities from global banks and financial institutions.
With the support of four dedicated credit analysts the managers will invest in a concentrated portfolio of around 40-100 securities – including subordinated debt instruments – with at least 65% of the portfolio invested in Contingent Convertibles (CoCos). The portfolio is expected to have relatively low sensitivity to interest rate risk.
Despite often representing a smaller allocation within traditional bond funds, the team said capital securities warrant a dedicated fund allocation due to the high-quality nature of issuers, which are subject to ongoing regulation and scrutiny; their potential to contribute to income and total return; their differentiated characteristics relative to other asset classes; their status as a standalone asset class that provides diversification, particularly relative to corporate credit and their relatively low sensitivity to interest rate movements.
Buckle said: “As we build on our fixed income expertise and offering, creating a dedicated strategy designed to provide investors with targeted exposure to financial credits, a rapidly evolving and increasingly important segment of the market, was a natural next step.”
Pelteshki added: “With differentiated risk characteristics and income potential, capital securities can represent a compelling opportunity - particularly for investors focused on generating income, whatever the market environment.”
