The Milan-headquartered investment house is directing investors' attentions towards the subordinated debt space.

Pioneer Investments has launched a global subordinated bond strategy to invest across both corporate hybrids and subordinated financials.

The company said the launch comes at a time when credit yields are below their historical average. The new strategy will target higher yields by investing primarily in the debt of investment grade rated issuers. It will take a quality bias to optimise risk-adjusted returns, focusing on both the quality of the issuer and the strength of the deal structure. 

“With yields becoming increasingly difficult to find, investors can opt to turn to bonds with longer maturities or issued by companies with higher credit spreads but the level of potential yield may not compensate for the underlying risks associated with this allocation, namely rising rates and increased default risk,” said Tanguy Le Saout, head of European fixed income. 

“Subordinated debt tends to have two times to four times the spreads of senior securities, and in turn may offer at least two times to three times the yield of senior bonds issued by similarly rated companies.”

The strategy will be managed in Dublin by Le Saout and portfolio manager Vianney Hocquet. They will be supported by a 25-person strong independent global credit research team.

Pioneer Investments manages more than €2.5 billion ($2.7 billion) in this space for clients in segregated mandates and within its flagship credit strategy. The firm, which has offices in 28 countries, had €224 billion in assets under management as of December 2015.