London-listed Old Mutual has seeded a new absolute return government bond fund following the addition of a former Ignis fixed income team.

Old Mutual Global Investors, part of the UK's Old Mutual Wealth, has launched a government bond fund with seed capital of £100 million ($153 million).

The Old Mutual Absolute Return Government Bond Fund will be spearheaded by lead manager Russ Oxley and his team, who joined OMGI from Ignis Asset Management earlier this year. Adam Purzitsky and Paul Shanta will act as co-managers, supported in their portfolio management and trading by Huw Davies and Jin Wong, and in systems development by Josh Heming.

The fund aims to generate positive total returns on a rolling 12-month basis with stable levels of volatility uncorrelated to bond and equity market conditions. It will target overnight cash plus 5 per cent per year. By focusing on expressing views on macro themes through exposure to forward interest rates, inflation expectations and foreign exchange, the fund aims to be diversified from global fixed income markets. OMGI said that forward rates provide a “rich source of uncorrelated investment opportunities” since different forward rates are influenced by diverse factors and different market players.

“Through our approach to investing, we are able to target specific risks and opportunities, without 'inadvertently' taking economic exposures to those risks we would rather avoid. At the core of our approach is the understanding that forward rates are influenced by very different factors depending on their location on the curve,” said Purzitsky.

“We believe we have the potential to deliver positive returns for investors within clearly defined volatility parameters irrespective of the direction of interest rates. Our investment track record of successfully managing these strategies is clear evidence that our process if very effective.”

OMGI had assets under management of £22.4 billion as of the end of June.