London-based HSBC Asset Management has launched a euro fixed-term bond fund, offering investors an opportunity to lock in higher yields for a four-year period to 2028, as central banks begin to move into a rate-cutting cycle.
The fund invests primarily in euro-denominated investment grade corporate bonds from developed markets, providing access at launch to yields of between 4.0-4.3% over the four-year term.
It aims to meet the needs of European investors as it is eligible for life insurance wrappers. At maturity, on 18 December 2028, the fund aims to return net invested capital to shareholders.
The portfolio has a strict focus on issuer selection and diversification across sectors, countries and ratings to avoid downgrades and defaults. It also seeks to employ a buy and maintain, low rotation strategy investing in bonds with a maximum maturity of about four years and with no bonds rated below B+ at the time of purchase.
The fund combines the advantages of single bond investments with the benefits of traditional bond funds. Like individual bonds, the fund has a defined maturity date and offers regular income payments as well as aims to provide a return of net capital at maturity. It also provides broad global diversification and professional management like traditional bond funds.
The fund will be available to investors in Switzerland, France, Luxembourg, Germany, Italy, Malta, UK, Ireland, Greece and Spain.
Aline Thiel, portfolio manager at HSBC Asset Management, said the fund aims to help investors put their cash to work and lock in current yield levels.
“By offering the fixed-term benefits of a single bond investment, alongside the diversification benefits of a traditional bond fund, it provides exposure to the highest quality developed market corporate bonds while taking advantage of high yields now,” they said.