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Nomura Asset Management (NAM)
Nomura Asset Management (NAM) has expanded its range of high yield bond funds available to European investors with the launch of the Nomura Funds Ireland – US High Yield Bond Continuum Fund.

The UCITS fund, which is a variant of NAM’s $3 billion US High Yield Bond Fund, applies ESG criteria in order to meet the requirements of Article 8 of the EU Sustainable Finance Disclosure Regulation (SFDR).  

The fund is managed by Nomura Corporate Research and Asset Management (NCRAM), Nomura’s high yield investment boutique, specialising in investment grade bonds, the firm said in a statement. The Continuum fund is benchmarked to the ICE Bank of America US High Yield Constrained Index, which yields more than 8.5 per cent as of late August.   

Steve Kotsen, the lead manager of NCRAM’s US high yield strategy, will manage the fund. He is supported by an assistant portfolio manager and NCRAM's team of 12 high-yield credit analysts and two trading specialists. 

"Sustainability has become a key element in the holistic assessment of a company's credit quality. Business and financial risks are closely linked to risks arising from threats to the environment or social cohesion,” Peter Ball, global head of distribution at NAM, said. 

"With interest rates on the rise, bonds are once again becoming an increasingly attractive asset class to investors. High-yield bonds bring diversification to a fixed income portfolio. Their leverage is almost as low as it has been for 10 years. With our rigorous investment process, we aim to benefit from the higher yield, while minimising the risks of default,” Kotsen added.

The Nomura Funds Ireland – US High Yield Bond Continuum Fund (ISIN: IE0004XE2ZO7), will seek to filter out issuers with the highest ESG risks in the investable universe, creating a sustainable portfolio with a lower exposure to the energy and basic industries sectors, the firm continued.  

A key component of the selection process is a separate ESG risk ranking for each individual issuer. NCRAM ranks issuers on a scale of 1 to 8, with companies rated 1 having the lowest sustainability risk. The Continuum strategy will not invest in the highest ESG-risk issuers with a rating of 6 to 8.   

The US high yield bond market delivered strong returns in the first half of 2023, with the ICE BofA US High Yield Constrained Index (HUC0) up 5.42 per cent, the firm added. Solid economic data helped credit spreads tighten, however, yields remain around 8.5 per cent with a maturity of around five years.