The fund aims to grow capital and provide income.
Investment policy and strategy
Core investment: Typically, around 70% of the fund is invested in high yield floating rate notes (FRNs) issued by companies from anywhere in the world. The FRNs are held directly and indirectly through derivatives combined with government bonds. The fund invests in asset-backed securities as well.
Other investments: The fund also holds other assets, including bonds issued by governments and cash.
Use of derivatives: Derivatives may be used to gain exposure to core and other investments, to reduce risks and costs and to manage the impact of changes in currency exchange rates on the fund’s investments.
Strategy in brief: The fund is designed to provide income while minimising the negative impact of rising interest rates by investing mainly in FRNs. The fund focuses on FRNs issued by companies with a low credit rating, which typically pay higher levels of interest to compensate investors for the greater risk of default.
Part of the fund may be invested in other fixed income assets, such as government bonds. Spreading investments across issuers, industries and countries is an essential element of the fund’s strategy and the manager is assisted in his selection of individual bonds by an in-house team of credit analysts.
Asset-backed securities: Bonds backed by assets that produce cashflows, such as mortgage loans, credit card receivables and auto loans.
Bonds: Loans to governments and companies that pay interest.
Derivatives: Financial contracts whose value is derived from other assets.
Floating rate notes (FRNs): Bonds whose interest payments, or coupons, are adjusted in line with movements in interest rates.
High yield Bonds: Bonds issued by companies considered to be riskier and therefore generally paying a higher level of interest.
Risks associated with the fund
The value of investments and the income from them will rise and fall. This will cause the fund price, as well as any income paid by the fund, to fall as well as rise. There is no guarantee the fund will achieve its objective, and you may not get back the amount you originally invested.
The value of the fund may fall if the issuer of a fixed income security held is unable to pay income payments or repay its debt (known as a default).
The fund may use derivatives with the aim of profiting from a rise or a fall in the value of an asset (for example, a company’s bonds). However, if the asset’s value varies in a different manner, the fund may incur a loss.
The fund invests mainly in one type of asset. This type of fund can experience larger-than-average price changes when compared to a fund which invests in a broader range of assets.
Changes in currency exchange rates will affect the value of your investment.
If the share class is hedged (H share class), it aims to mirror the performance of another share class. We cannot guarantee that the hedging objective will be achieved. The hedging strategy will limit holders of the hedged share class from benefiting if the hedged share class currency falls against the US dollar.
The fund will invest in emerging markets which are generally smaller, more sensitive to economic and political factors, and where investments are less easily bought and sold. In exceptional circumstances, the fund may encounter difficulties when selling or collecting income from these investments, which could cause the fund to incur a loss. In extreme circumstances, it could lead to the temporary suspension of dealing in shares in the fund.
When interest rates rise, the value of the fund is likely to fall.
Where market conditions make it hard to sell the fund’s investments at a fair price to meet customers’ sale requests, we may temporarily suspend dealing in the fund’s shares.
Some transactions the fund makes, such as placing cash on deposit, require the use of other financial institutions (for example, banks). If one of these institutions defaults on their obligations or becomes insolvent, the fund may incur a loss.
The Fund allows for the extensive use of derivatives.