London-based investment manager Stratton Street Capital will bring its international bond fund to Australia, with Equity Trustees acting as responsible entity.
Responding to the lack of specialist fixed income managers in Australia, Stratton Street fixed income portfolio manager Andrew Seaman said the New Capital Wealthy Nations Bond Fund is one of a number of strategies the fund manager would be launching in Australia.
He said that Stratton was particularly attracted to Australia's sophisticated wholesale and institutional investor market and the strong regulatory approach.
"You can see that in the number of (fixed income) launches in Australia — they're experts on it but from what I can gather there's been relatively few launches of late, which suggests that it's quite a stringent (regulatory) regime," he said.
Launching the fund in the UK in September 2009, Seaman said Stratton had recognised early that global bond markets do not price securities efficiently. The company had developed a list of 12 countries that had the potential to face debt issues in the future. This included countries like Portugal, Spain and Greece.
"We find there are bonds that have substantially higher yields but the same or lower risk profile compared to others," he said.
"There are plenty of wealthy countries which can pay you considerably more than most indebted countries."
These included AA-rated sovereign wealth funds in Abu Dhabi, Qatar, China, Singapore and South Korea, which have the overseas assets to pay back foreign debt and are borrowing to fund long-term growth.
"By holding a portfolio of good value, quality bonds that are hedged into Australian dollars, investors in Australia will have little volatility but higher potential returns than domestic securities," he said.
Seaman said appointing Equity Trustees as RE would allow Stratton to leverage a strong distribution network and avoid the costs of setting up administration.
