Aviva Investors launched a Global High Yield Bond fund last week, the first product launched under the Aviva group’s new asset management brand.
The Luxembourg Sicav, which invests in below-investment grade securities, looks to take advantage of the perceived value in the higher-rated area of the high yield market. Its aim is to allow investors to capitalise on attractive returns compared with other equity and fixed-income asset classes.
The Aviva Investors Global High Yield Bond fund is lead-managed by Josh Rank, the asset manager’s high yield fund manager. Rank says that now is an attractive entry point. “The valuation of the high yield bond market is approximately at 1,000 basis points. At these levels and [with] the current yield of the overall portfolio in excess of 13%, it is a very attractive time to enter the marketplace.
“Generally,” he adds, “high-yield gets a bad rap. But if you look at the lowest annual return over 20 years, it was [a fall of] 6.02%, compared with in excess of 20% for equities.”
The new fund consists of primarily BB/B rated securities, while CCC rated bonds are chosen opportunistically. All investment is corporate debt.
“We are conservative but flexible,” Rank explains. “Overall the market is about 25% in CCC. We have less than 10% in CCC. It’s a case-by-case basis. We are a high-quality manager. The CCC space gives high yield a bad name.” He adds: “We are [also] defensively positioned from an industry standpoint. We have a large overweight in healthcare, for example, and aerospace and defence. Our underweights include finance and autos.”
The Aviva Global High Yield Bond fund follows a bottom-up investment process and aims for a diversified portfolio with a minimum of 75 stocks.
There are 115 stocks at the moment. The maximum individual weighting is 3.5%. Low correlation to other asset classes adds to the diversification, says Rank.
A total of five high-yield portfolio managers based in America and Britain, including Rank, are involved in managing the Aviva Investors Global High Yield Bond fund. A credit team of 24 analysts supports them.