Enhanced Buy and Maintain Credit Fund


Fund overview

The Fund will aim to provide excess income (relative to equivalent UK Government Bonds) over the life of the Fund.  It will target a spread at inception, relative to gilts, of +1.30-1.60%. This spread target may move over time, reflecting any change in market conditions. In comparison to the RL Buy & Maintain Credit Fund, the Fund can invest in secured sub-investment grade credit and subordinated debt in order to add yield to its portfolio though its exposure to such assets. No more than 5% of the Fund will be invested in bank issues, with no more than 10% Bank & Financial Services. Covered bonds are excluded from these investment parameters. The Fund will have an overall objective to minimise the probability and impact of defaults by maximising recovery rates and targeting stock selection to areas that remain undervalued on a risk adjusted basis.

The Fund will aim to provide excess income (relative to equivalent UK Government Bonds) over the life of the Fund.  It will target a spread at inception, relative to gilts, of +1.30-1.60%. This spread target may move over time, reflecting any change in market conditions. In comparison to the RL Buy & Maintain Credit Fund, the Fund can invest in secured sub-investment grade credit and subordinated debt in order to add yield to its portfolio though its exposure to such assets. No more than 5% of the Fund will be invested in bank issues, with no more than 10% Bank & Financial Services. Covered bonds are excluded from these investment parameters. The Fund will have an overall objective to minimise the probability and impact of defaults by maximising recovery rates and targeting stock selection to areas that remain undervalued on a risk adjusted basis.

Manager

The Fund is managed by Shalin Shah. 

Shalin joined the Fixed Income Team at RLAM in mid-2008. Prior to becoming a credit fund manager, Shalin was involved in a variety of areas including LDI (Liability Driven Investment) product development and risk management. Before joining RLAM, Shalin worked at PricewaterhouseCoopers LLP where he was involved in advising clients on a variety of investment solutions, including LDI and strategic asset allocation. Shalin holds a BSc in MORSE (Mathematics, Operational Research, Statistics and Economics) from the University of Warwick and is a qualified actuary.

Investment approach

The Fund is an actively assessed portfolio, which invests in a broad range of sterling denominated fixed interest investments. The Fund aims to deliver robust long-term cashflows, which go some way to matching pension fund liabilities. We maintain that corporate bonds can provide a genuine opportunity for pension schemes to better match their liabilities and ‘lock-in’ excess return for the long term.

Our deep understanding of the markets in which we invest, combined with exhaustive analysis, means that we have the necessary expertise to build robust credit-based strategies that are ideally suited to buy and maintain investors’ long-term needs and objectives. At RLAM we regard credit markets to be inefficient. Our enhanced buy and maintain strategy seeks to capture these inefficiencies, whilst providing the opportunity for attractive risk-adjusted returns.

Unlike a typical actively managed credit fund, the manager aims to keep activity in the portfolio at a low level, with a particular focus on bonds that offer genuine and protective credit enhancements. The Fund’s sector and stock selection is based on an assessment of fundamental risk and return, with an emphasis on covenants, security and structure. The secured debt will have a bias towards the UK, given the robustness of the legal system, whilst the unsecured element will be globally diversified.

Product Risk Warning

Past performance is not a guide to future performance. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. Unlike the income from a single fixed income security, the level of income (yield) from a fund is not fixed and may go up and down. For funds that use derivatives, their use may be beneficial, however, they also involve specific risks. Derivatives may alter the economic exposure of a fund over time, causing it to deviate from the performance of the broader market.