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BlueBay launches investment grade convertibles fund

BlueBay launches investment grade convertibles fund

BlueBay Asset Management has launched an investment grade convertible bond fund in order to capture growth in demand among conservative investors, it has emerged.

The BlueBay Global Investment Grade Convertible Bond fund was deliberately launched with little fanfare by the London-based asset management firm in November 2012 and has just now come to light.

Co-run by Michael Reed and Alessandro Esposito, the fund is designed to specifically target interest among conservative investors who are wary of the volatility in the broader convertibles market.

Speaking to Citywire Global this week, Reed said: ‘The investor demand has been mainly driven by regulatory requirements for investment grade securities.'

'For example, the BaFin regulations in Germany have pushed institutional investors towards the higher grade parts of the market.’

‘It has been a slow burn approach as we wanted to establish a track record of six-to-12 months. This typically suits the approach of convertible investors, who are sometimes cautious of committing capital to new fund launches. The fund has risen 16% since inception in November.’

The BlueBay Global Investment Grade Convertible Bond fund is designed to invest 85% of its assets into investment grade convertible bonds, while a maximum of 15% can be invested in sub-investment grade convertibles but nothing rated below B-.

On a geographic basis, the fund currently has 20% exposed to the emerging markets, with 25% in Europe, 40% in the US and a further 10% in Japan.

According to the most recent available data, the largest holdings in the fund are currently discount provider Priceline.com (6%) and US banking chain Wells Fargo & Co. (4.5%).

The fund will sit within BlueBay’s convertible bond funds range, which currently has $2.5 billion in assets under management across developed and emerging market strategies.

It will be benchmarked against the UBS Global Investment Grade Hedged Convertible Bond Index (USD).

Reed and Esposito have also co-run the BlueBay Global Convertible Bond fund since its launch in December 2008. It has returned 26.84% over the three years to the end of June 2013 compared to a 22.86% rise by its Index, the UBS Global Convertible Bond EUR.

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