RBC Global Asset Management (U.S.) launched the RBC BlueBay Enhanced Income Fund, a closed-end interval fund providing U.S. investors with access to alternative credit markets through collateralized loan obligations (CLOs).
The fund is an actively managed portfolio primarily investing in equity and junior debt tranches of CLOs, with the flexibility to invest in other structured credit securities. CLO tranches are bond securities backed by a pool of corporate loans with BB and B credit ratings. Regionally, the fund will focus predominantly on the U.S. market but may also allocate investments to European CLOs. Equity and junior debt tranches have higher return potential and greater complexity, making them more likely to be classified as alternative investments. The fund expands RBC GAM’s alternative investment product offering to intermediary and retail investors.
“We’re proud to bring the alternative investment experience of our BlueBay fixed income platform to investors in a structure seeking to provide total return primarily consisting of income,” Donald Sanya, CEO of RBC Global Asset Management-U.S., said. “Alternative assets have long been an important source of yield and diversification for institutional portfolios, and this fund aims to make that opportunity more accessible to investors in the intermediary and wealth management space. We anticipate continued adoption of semi-liquid vehicle structures such as interval funds and see them as a significant area of growth for our U.S. business.”
The RBC BlueBay Enhanced Income Fund is managed by portfolio managers Mark Shohet, Ajeet Atwal and Sid Chhabra of BlueBay’s securitized credit and CLO management team. The team employs a disciplined, bottom-up investment process focused on credit selection, structural analysis and risk management.
“CLO equity has the potential to provide outsized returns across various cycles as it may benefit from widening asset spreads alongside long-term locked up financing costs,” Mark Shohet, BlueBay portfolio manager, structured credit and CLOs at RBC Global Asset Management, said. “With the RBC BlueBay Enhanced Income Fund, we are aiming to provide retail investors access to an asset class that has traditionally been reserved for institutional investors.”
The fund is expected to be available through select investment platforms. Investors should review the prospectus carefully before investing, as interval funds have unique liquidity characteristics and risks.
Destra Capital Advisors will serve as a distribution partner and provide consulting services to RBC GAM.