EUROPE - UBS Global Asset Management has launched a new Euro corporates bond fund as investors continue to seek shelter from volatile equities.
The UBS (Lux) Bond Sicav EUR Corporates commits to a wide spread of prime securities. The firm already runs a similar fund exclusively for institutions - the UBS (Lux) Institutional Fund - Euro Corporate Bonds AA - which is registered in Germany and Luxembourg.
According to UBS, the yield potential of corporate bonds is higher than that of government bonds, with a similar duration, in an economic upturn. Some analysts fear that the government bond market is becoming overheated and is particularly vulnerable in a post-war environment.
In a recent report from ratings and research firm Morningstar, about 66% of European fund managers thought that government bond markets were becoming dangerously inflated. However, 61% of managers predicted that long fixed-income strategies would perform best over the next 12 months, with corporate bonds overwhelmingly the best sector (92%).
UBS estimates the value of the euro corporate bond market to be around E700bn. This figure is spread across over 800 different bonds and accounts for 15% of the total euro bond market.
Last month, Barclays Global Investors also backed the corporate bond market with the unveiling of Europe’s first ever corporate bond exchange traded fund.
The iBoxx Euro Liquid Corporates started trading on March 19, with E750m of capital, on the XTF segment of the Deutsche Börse.
The ETF targets both institutional and individual investors and is expected to deliver 4.44% gross yield per annum.
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