Lombard Odier Investment Managers has launched a fund to help investors deal with the myriad of negative interest rates in today's market, Citywire Selector can reveal.
The LO Funds – Ultra Low Duration Bond employs a range of strategies to capture returns from market inefficiencies.
These include FX arbitrage, exploiting short-term bond market mispricing due to events of forced selling and opportunities arising from corporate actions.
The firm's head of money markets, David Callahan, will manage the fund with Florian Helly. They will draw on the expertise of the entire Lombard Odier IM fixed income platform.
In terms of asset allocation the fund seeks to mitigate the current fractured liquidity environment by investing in short-dated bonds, investment grade bonds and on-call deposits.
Holdings are kept small and the fund is unconstrained by sector or geography.
Commenting on the launch, Callahan said: ‘The environment of negative interest rates is eroding investors’ cash holdings and we identified that investors wanted to put a portion of their cash to work by taking a limited amount of credit risk.
‘In doing so they can maintain a liquidity buffer and exploit a range of opportunities in the fixed income markets which allows them to potentially enhance their yield and mitigate credit risk.’