Fidelity International has added a short-dated corporate bond fund to its UK fixed income range.
The Fidelity Short Dated Corporate Bond fund is a bottom-up conservative mandate, aiming to achieve both capital growth and income by investing in sterling-denominated investment grade corporate bonds with a remaining maturity of five years or less.
The firm is the latest in roll out a short-dated bond fund, citing the current low interest rate environment and potential for higher inflation and interest rate rises over the medium to long-term as the reason. Aberdeen and Standard Life Investors have also recently launched similar vehicles.
Ian Spreadbury and Sajiv Vaid will manage the fund, using the firm’s credit research capabilities. Spreadbury and Vaid already run the Fidelity MoneyBuilder Income and Extra Income funds.
Vaid says: “The yield dilemma is as present as ever in today’s low interest rate environment, with cash allocations eroding real wealth. However, cautious investors are wary of extending risk to capture yield at this point in the cycle.
“While we think yields will remain low in a historical context – given a fundamental backdrop characterised by high debt, elevated political risk and low nominal growth – this fund caters to those investors with a cautious outlook.”
John Clougherty, head of wholesale, Fidelity International, adds: “We are seeing demand from clients who are looking for low volatility solutions to secure a modest level of income. This fund is a natural extension to our fixed income product suite in the UK and will aim to deliver the three core attributes we look for in a fixed income investment; a consistent level of income, low volatility and equity diversification.”
The sterling denominated fund is benchmarked against the Bank of America Merrill Lynch 1-5 Year Eurosterling index and structured as an Oeic, with an ongoing charge figure of 0.38 per cent.