Nikko Asset Management has launched a Corporate Hybrid Bond Fund which invest in hybrid debt of highly rated corporations.
The Fund is managed by the asset manager’s London-based Global Fixed Income team and JPY 5.1 billion (EUR 42 million) was raised from Japanese institutional investors, reflecting growing demand for higher yielding quality investment solutions.
Senior High Yield Analyst and portfolio manager of the fund Richard Kehoe said: ‘’Corporate hybrids have features of both debt and equity securities that can provide an incremental yield advantage relative to senior unsecured debt, which is attractive to our institutional clients.
“We believe this is an area of the market where security selection based on rigorous fundamental research best positions you to capture opportunities in the space.”
The asset manager said that demand for corporate hybrid bonds had “grown significantly” over the past few years, with issuance expanding beyond utilities and telecommunications companies to auto manufacturers and energy companies, among others.
Corporate hybrid bonds are senior to equities in the capital structure and pay a coupon, and yet share equity characteristics such as no maturity date (or very long maturities) and the issuer may decide not to pay the coupon, similar to a dividend. Their location within the capital structure, the asset manager said, provides active investors the opportunity to earn a strong premium.
