Allianz Global Investors is keeping an ‘active eye’ on its Income and Growth fund, after the Ucits version of the strategy took in over $3 billion in the first half of 2017.
Speaking to Citywire Selector, Doug Forsyth, chief investment officer for US fixed income and lead manager on the Allianz Income and Growth fund, said that there are no stated limits on the $18.4 billion fund’s capacity, but that the firm is mindful of protecting its investment philosophy.
The fund was singled out in Citywire Selector research showcasing the cross-border funds accruing the biggest net inflows over the six months to the end of June 2017. It ranked second behind the Pimco GIS Income fund for its performance over this period.
San Diego-based Forsyth told Citywire Selector that the 20% increase in assets had been a steady build, which had eased the distribution of incoming capital. He added that this was further managed by the fact that the fund operates a three-sleeve approach, covering high yield bonds, convertible bonds and equities.
‘So a $3 billion flow is actually a $1 billion flow, which limits the strain on these funds,’ he said in a telephone interview. ‘Flows have also been fairly consistent throughout the year. It's not like we had a boom January and February and then a decline. It has been fairly consistent and that is really all year.’
‘I think that is critical for investor confidence, in that it is clear this is the way we are trying to allocate. The Income and Growth structure was specifically designed to capture that asymmetric risk reward, so it somewhat participates in equity market growth and protects in equity market decline, like converts. It is designed to participate and protect.’
The fund is currently evenly split, with 33.4% allocated to convertibles and equities respectively, and with 33.2% in high yield. When asked about potential upper limits, Forsyth said there are always considerations but no hard rules in place.
‘We are always watching that capacity. We looked at different asset classes within our purview in the past and said that it needs to be closed for investors because the style they are expecting their returns to be in is becoming more difficult.
‘At this time we don’t have any capacity constraints and we are investing without any issues, but we are keeping an active eye on it. We won’t name a specific point or dollar amount because the market always moves.
‘We are keeping a close eye on it and we want to make sure that investors’ long-term goals are met. If we feel that is being challenged, we will be active about closing products, as we have done before.’
On a three-year total return basis, the Allianz Income and Growth fund returned 11.4% in euro terms, which compares to a rise of 9.8% by the average fund in the Mixed Asset – Balanced EUR sector over the same period to the end of June 2017.