This is one of two new launches that Thames River is bringing to the market. The fund will be managed by Stephen Drew and he will be supported by a team of three co-managers and a larger team of analysts.
The Thames River Global Credit Fund will be focused on developed markets, but the team will also have the flexibility to include some exposure to emerging markets.
The fund will typically invest around 60% in higher quality ‘investment grade’ bonds and the remainder in higher risk high yield and/or emerging market bonds. The fund will target a yield in the region of 6.5% (variable and not guaranteed) and this income will be paid quarterly.
Economic factors like changes in interest rates and inflation can influence the prospects of individual bonds, which is why Stephen Drew believes it is important to carry out both economic analysis as well as research on individual companies. He will not chase high yields if he believes the risks outweigh the benefits: in an unstable economic environment, an abnormally high yield can signal a distressed bond with an increased risk of default.
This fund has the flexibility to use sophisticated investment instruments such as derivatives to help shelter some of the fund’s capital during volatile periods. The success of this strategy depends on the skill of the manager, and it could prove costly if he gets it wrong. The aim is to take advantage of all possible opportunities throughout the economic cycle.
Investors should note that the fund has an annual management charge of 1.5% and a performance fee of 12.5% of any outperformance of 3 month LIBOR (the London Interbank Offered Rate – the interest rate at which banks lend to each other). Performance fees can make these types of funds expensive - we argue that any active fund manager should be able to generate outperformance over the longer-term, and this type of fee is therefore often unjustified.
Please note this fund is not on the Wealth 150 list of our favourite funds. As with many new launches we would like to see how the fund’s strategy fares before making a further assessment.
Meera Patel
Senior Analyst
> Key Features of the Thames River Global Credit Fund
> Simplified Prospectus for the Thames River Global Credit Fund
