Principal Global Investors, the fixed income specialist, has been prompted by the current environment of low interest rates and a return to ...

Principal Global Investors, the fixed income specialist, has been prompted by the current environment of low interest rates and a return to rising inflation to launch a diversified fixed income fund.

The fund, which was launched two years ago in Australia, will be tailored to UK and continental European investor needs through hedging it into local currencies.

Grant Forster, Principal Global Investors Europe’s chief executive, told WealthBriefing: “Portfolio manager Rob Da Silva set this up in Australia in demand for yield. Generally sophisticated investors accept the logic of looking further a-field for this.

“Fixed income in isolation may look risky but by combining fixed income securities and finding a selection which are not correlated that highly, a blend can be created that can lower volatility. In addition we can shorten the duration, in some cases using derivatives to shorten it.”

The duration range will generally be managed between 0 and 1.5 years, with an upper limit of three years in order to target low volatility.

The fund aims at returns of 3 per cent per annum gross in excess of three month LIBOR interest rates over rolling three year periods.