Schroders launches Strategic Bond fund for new hire Isaac

Schroders is launching a strategic bond fund for former GLG fixed income star Gareth Isaac and head of global macro Bob Jolly.

The Schroder Strategic Bond fund, which will sit in the competitive IMA £ Strategic Bond sector, will invest in government bonds, investment grade corporates, high yield corporates and emerging market debt.

Isaac, who joined the group last October from GLG having previously managed the GLG Core Plus Sterling Bond, GLG Total Return Bond and GLG Gilt funds, will be lead manager with Jolly as alternate.

Investment Week understands the fund will launch in the second quarter.

As well as taking long positions in debt they favour, Issac and Jolly have the ability to use derivatives to protect the portfolio in falling markets.

While the fund will invest across currencies, 80% of the exposure will be hedged back to sterling.

The fund is the first for Isaac since his move to Schroders last year. While at GLG he outperformed peers, delivering top quartile returns for investors in the GLG Core Plus fund before his departure in August.

Over three years, his flagship fund returned 33.8% versus an average return of 21.5% for the IMA Sterling Corporate Bond sector, according to Morningstar. GLG closed all three of his funds following Isaac's departure.

Isaac, who sits on Schroders fixed income multi-sector team as a senior portfolio manager, said the flexibility of strategic bonds was key for investors in an environment where interest rates are low and static.

"Against a backdrop of rock bottom interest rates in the western world combined with low yields on money market and government bonds, investors are turning their attention to alternative fixed income asset classes such as investment grade and high yield bonds for better returns," said Isaac. 

"We currently see fantastic value in good quality corporates and high yield issuers as a part of a balanced fixed income portfolio."

The launch is a u-turn for Schroders after its move to convert its £380m Strategic Bond fund last June into an absolute return portfolio, in anticipation of rising interest rates.

At the time Schroders said the change to an absolute return mandate would provide managers Bhupinder Bahra and Frederick Bourgoin with greater flexibility and the ability to profit from a rising interest rate environment.

It will once again mean Schroders is going head to head with some of the biggest names in the bond fund world, including M&G's Richard Woolnough running the £5.7bn Optimal Income fund, as well as Paul Causer and Paul Read's £3.1bn Invesco Perpetual Monthly Income Plus fund.

Robin Stoakley (pictured), managing director of UK intermediary at Schroders, said the new fund was ideal for investors seeking income and an alternative to equities.

"We are delighted to launch a fixed income offering which allows the fund manager flexibility to invest in the full spectrum of fixed income instruments globally," he said.

"This fund is ideal for fixed income investors seeking higher performance potential and is an excellent way to diversify from an allocation to pure equities."

The fund's launch is subject to FSA approval.