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Nomura Launches US High Yield Bond Fund

Amisha Mehta Deputy Editor 1 November 2016

Nomura Launches US High Yield Bond Fund

The new fund seeks to capture the high yield bond market’s “attractive” total returns.

Nomura Asset Management UK has launched a UCITS bond fund focusing on the lower-risk segment of the US high yield universe.

The Ireland-domiciled Select US High Yield Bond Fund has a minimum credit rating of B3/B-, unlike its US High Yield sister fund, which is managed under the same umbrella.

The new fund will avoid CCC and distressed debt names, offering investors a more conservative, quality-driven investment approach. It aims to deliver yield and capital gains, with an annual performance target of 1 per cent above its benchmark, the Bank of America Merrill Lynch BB-B US Cash Pay High Yield Constrained Index.

Managed by Nomura Corporate Research and Asset Management, the fund will be led by Amy Yu Chang, who will be supported by 12 credit analysts. The team will take a total return, bottom-up approach, with a top-down view based on criteria including default rate expectations, monetary and fiscal policy and overall health of the capital markets.

“We believe that the US high yield market offers an attractive yield in a low yield world. We currently expect a slow growth environment coupled with an accommodative Fed and global central bank stimulus, which are supportive for high yield. Additionally, we expect defaults, which were mostly concentrated in the oil and gas and metals and mining sectors, to decline from their recent peak,” said Chang.

“NCRAM's decision-making approach is based on identifying and investing in ‘strong horse’ companies across the rating spectrum that can carry their debt load through the economic cycle, while also seeking to minimise losses. These companies generally have a positive ability to de-lever their balance sheet by generating strong cash flows that are sustainable over time.”

NCRAM manages $17.6 billion in assets, including $12.7 billion in US total return high yield strategies.

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