Nomura Asset Management (NAM) announces the launch of its first mutual fund offering European investors access to the corporate hybrid bond asset class. The Nomura Funds Ireland – Corporate Hybrid Bond Fund (ISIN: IE000PY311L1) provides investors with a portfolio of bonds from high quality issuers that offers yield levels comparable to those of high yield bonds.
The fund will be managed by Julian Marks, Head of Corporate Hybrid Bonds, who recently joined NAM in January after fifteen years at Neuberger Berman where he was the lead portfolio manager for the Corporate Hybrid Bond Strategy and also a portfolio manager on broader Investment Grade credit mandates. Julian and his twelve-member investment team of analysts and portfolio managers are responsible for analysing issuers and individual bonds on a fundamental and ESG basis. The result of their multi-layered process is a concentrated portfolio of 30 to 40 issuers, about half of which are substantially overweighted.
The fund was launched in-line with NAM’s commitment to providing the best opportunities for clients. The corporate hybrid bond market continues to grow, reaching EUR 194 billion in recent years, as issuers continue to seek to optimise their capital structures, support their credit ratings and minimise their weighted average cost of capital by issuing these bonds. For investors, these bonds are attractive, with an average yield of in excess of 8 % p.a. in euros. Additionally, these bonds are mostly issued by stable companies with robust balance sheets and credit ratings in the investment grade range, predominantly from Europe.
Julian Marks, Head of Corporate Hybrid Bonds, said: “We believe this is a particularly favourable time to invest in corporate hybrid bonds, because the risk premiums are, on average, over 100 basis points above what we consider to be fair value. This means that there is considerable potential for price gains and furthermore, certain issuers are, in our view, significantly mispriced, creating good opportunities for active managers to generate added value for investors.”
Peter Ball, Global Head of Distribution at NAM, adds: “In hybrid bonds, we see some of the best investment opportunities in the entire bond market. Only a few market participants can take advantage of them because it requires a high level of specialised expertise and experience. Having brought in Julian, who has an in-depth knowledge of the market, we can now offer our clients a hybrid bond investment solution that can help to effectively diversify their portfolio and open up new sources of return.”