Baring Asset Management plans to convert its $24.7m (£17.4m) Baring US Plus Bond fund to the Baring Global Aggregate Bond fund, subject to unit-holder approval.
The group will expand the investment remit of the Dublin-based fund to include the global fixed income space, where the manager will look for long-term growth opportunities. “We wanted to open up opportunities in European markets, Japanese markets and the so-called developing markets,” says Harjeet Heer, the manager of the fund. “When the recovery comes we see it coming in credit rather than government bonds.”
With investors desperate to find safe havens in a recessionary environment, gold and gilts have figured prominently on the radar. The distressed levels at which corporate bonds currently trade have started to draw attention, with many funds in the sector seeing huge inflows in recent months.
“We will be looking at European and UK corporate debt but we will also be looking at Mexico, Poland and South Africa, where people are not seeing a recovery happening,” says Heer. These countries will present a tremendous opportunity in the future, he adds.
The dollar-denominated fund is up 18.6% over the five years to January 31. Because of the weakness of the pound over recent months, it has risen 52.35% in sterling terms over the same time period.
Heer says the expanded remit of the fund will allow him to reflect his currency views more accurately in the portfolio. “From the perspective of a dollar-based investor, the [fiscal stimulus] measures already announced in the US will mean that the dollar will have to weaken,” he says. “[With the expanded remit] the fund will be able to make currency plays. For example, we have had an underweight in Japanese yen which is starting to come through.”
Heer will be able to use foreign exchange transactions, forward foreign exchange contracts and currency futures, options and swaps to reflect his views on currencies.
To reflect its increased remit the group aims to almost double the size of the fund.
“You are looking for the minimum to be $20m with an optimal target of between $40-$50m to achieve our diversification aims,” says Heer.