Investment Themes Fixed Maturity Bond Funds

Fixed Maturity Bond Funds

Looking for Yield Pickup?

Fixed Maturity Bond Funds

Tough times for income investors

A prolonged period of record low or even negative yields has left investors with the risk of eroding wealth over time. In the search for yield, investors have to move higher up the risk spectrum, accepting more risk and uncertainty along the way.

With market conditions remaining difficult and unlikely to change, what can clients do to source income?

Investment solutions for the current climate

Funds with a short and predefined maturity can help investors to achieve the envisaged gross yield and limit interest rate and spread risk.

Fixed maturity bond funds offer investors a yield pickup by investing in a globally diversified portfolio of bonds with a maximum maturity close to the fund’s own expiration date. When the fund matures, investors are repaid their share of its net asset value.

A key advantage of this type of fund is the fact that it provides investors with a payout structure that is comparable to a single-bond investment, but with greatly reduced single-issuer risk, given the well-diversified portfolios.

Risks

  • Bonds carry the risk of default; if the issuer defaults or goes into liquidation, investors may lose some or all of their invested capital.
  • The investments are subject to market fluctuations.
  • There is no guarantee for the level of coupon payments or the value of the investments at maturity or at any other time.