AXA Investment Managers has launched the AXA IM Maturity 2022 fund, a fixed term bond fund primarily invested in US high yield bonds, managed by Carl ‘Pepper’ Whitbeck, head of US Fixed Income.
The fund manager takes a “buy and monitor” approach, intending to hold the securities for five years until 2022. The team will build a diversified portfolio of US high yield bonds at the beginning of the term, investing in names that in their view have solid business fundamentals. A strict sell discipline is applied to any position if an issuer’s credit fundamentals deteriorate.
This “buy and monitor” approach aims to maximise yield in a cost-effective manner by minimising turnover and therefore transaction costs. At the end of the term in 2022, the fund will self-liquidate – all bonds will either be repaid or sold. The fund targets an annualised gross return of 4 – 7% USD. This annualised return is an objective and is not guaranteed.
The fund is currently available in Austria, Belgium, France, Germany, Ireland, Italy, Spain, Singapore and UK, and the firm expects registration in Portugal and Switzerland in the coming months dependent on relevant regulatory approvals.
Whitbeck said: “In this slow growth, low interest rate environment, we believe that active fund managers in the US high yield asset class can deliver mid-to-high single digit annualised returns by collecting coupons and avoiding defaults. US high yield offers a diverse, dynamic and liquid investment market. At almost two trillion dollars in size, the US high yield market is significantly larger than the European high yield market, with over 1000 high yield companies across a wide variety of industries.
“It is almost impossible to time the market so this Fund, which has a pre-determined investment period, may help to alleviate that investor concern by mitigating market and interest rate risk. By staying invested for the full five year life of the Fund, investors can pay less attention to the interim price movements. The Fund is designed to be held until the maturity date.
“For investors looking for yield, this has been a challenging environment, however the US high yield market has been delivering so far. We seek to combine finding yield with a prudent approach towards credit selection. We aim to avoid speculative bonds in the portfolio in an attempt to take risks that we can analyse and manage. Our focus is firmly on avoiding defaults.”
AXA IM is one of the largest managers of US high yield bond portfolios. The team (consisting of 13 US high yield specialists) currently manages over $27bn.