With a fixed term, the Axa IM Maturity 2022 fund was designed to alleviate investor concern over market and interest rate risk without vain attempts to time the market, which it believes is almost impossible to do.
Whitbeck will take a “buy and monitor” approach, minimising turnover – and therefore reducing transaction costs – and at 28 February 2022 the fund will self-liquidate, with all bonds either being repaid or sold.
It will target an annualised gross return of 4%-7% with US dollar as its base currency.
Given today’s environment, featuring slow growth and low interest rates Whitbeck said that active managers in the US high-yield space could seek mid-to-high single digit returns by “collecting coupons and avoiding defaults”.
“We seek to combine finding yield with a prudent approach towards credit selection. We aim to avoid speculative bonds in the portfolio in an attempt to take risks that we can analyse and manage. Our focus is firmly on avoiding defaults,” he said.
As a market of nearly $2trn in size comprising more than 1,000 companies across a diverse spread of sectors, while the backdrop had been challenging for yield-seeking investors, the US high yield space was delivering.
Early redemptions – ahead of the five-year term - will be made at the bid price with investors facing the risk of a lower return than those remaining in the fund until maturity.
“By staying invested for the full five-year life of the fund, investors can pay less attention to the interim price movements. The fund is designed to be held until the maturity date,” the manager added.
The fund is a fund of an umbrella fund – an Irish UCITS ICAV – called Axa IM WAVe and is currently available in Austria, Belgium, France, Germany, Ireland, Italy, Spain, Singapore and the UK. Registration in Portugal and Switzerland are due in the coming months, subject to regulatory approvals.