Two new directional funds for dollar and euro investors are being launched by Baring Asset Management (BAM) on 22 November 2004.
A fixed offer period will run for one week from 15 - 19 November. The Baring Directional Fund (Euro) and Baring Directional Fund (USD) funds aim to deliver returns to investors of 4% above 3-month cash rates.
Commenting on the issues facing bond investors Ian Pascal, Marketing Director at BAM, said: "We believe that the two decade long bull market in bonds is ending and now is the time to ask yourself "Can you still make money in bonds?" Our answer is yes, but not in the way you used to."
These launches follow the successful launch of the Sterling denominated Baring Directional Global Bond Trust in March 2004. The fund has already attracted over GBP90 million from investors and demonstrated that it is possible to generate positive returns even in difficult conditions for bond markets. The fund has delivered an absolute return of 6.3% since launch.
The Dollar and Euro versions of the Directional Fund are being launched in response to demand from international investors who are nervous about the prospects for conventional bond funds.
Pascal explained: "International investors are looking to generate positive absolute returns whichever way the bond and currency markets move. Our fund can short both bond markets and currencies by taking advantage of new UCITS III legislation. Traditional bond funds cannot do this as they are restricted in the instruments they can use."
Colin Harte, lead fund manager and BAM's Head of Government Bonds and Currencies, said: "With difficult conditions in the bond markets and upward pressure on yields in most areas of the world, we are likely to see high levels of fixed income volatility in the future. International fixed income investors can take advantage of this volatility through directional investing strategies."
Harte is responsible for managing a number of BAM's global bond products, all of which require judgements to be made over the direction of bond, interest rate and currency movements. He has 22 years of investment experience predicting market movements.
Pascal added: "As bonds are central to most portfolios, 'directional funds' are an asset class we expect to become increasingly important to investors. We are seeing a great deal of interest in this product from a wide range of intermediaries. UK advisers are increasingly regarding the Sterling based fund as a key element of their clients' bond portfolios. This is because the fund aims to achieve positive returns, even when bond markets are falling, at relatively low levels of risk. The Sterling fund has also shown very low levels of correlation with traditional bond markets, making it an excellent source of diversification for a bond portfolio."
BAM is one of the UK's leading specialists in global fixed income investment with 20 years experience as a Global Fixed Income specialist, managing GBP 9.5 billion across mandates worldwide.
The Dollar and Euro denominated funds launch on 15 November 2004, with a one week offer period. The minimum investment for the Euro fund is EUR 3,500 and for the Dollar fund, USD 5,000.