Pictet Asset Management has launched an unconstrained global credit fund, targeting opportunities arising from the "distortion" in fixed income markets brought about by the coronavirus pandemic, and the unprecedented monetary and fiscal stimulus enacted in response to it.
The Pictet-Strategic Credit fund seeks to provide attractive risk-adjusted returns through a diversified portfolio "designed to reduce risks, protect capital and capture higher yields", the firm said.
It also targets a low correlation to traditionally risky assets by allocating assets across global credit markets.
Pictet has raised $185m in seeding capital for the "post-Covid markets" launch, reflecting "fantastic interest in the strategy", predominately from the UK wholesale market, head of sales for UK and Ireland Wendy Appleton told Investment Week.
The Luxembourg-domiciled UCITS fund, which will be managed by Pictet's head of investment grade credit Jon Mawby, aims to deliver a return of 5% net of fees per annum, over a rolling three- to five-year period.
Fees for its I GBP share class will be an AMC of 35bps and an OCF of 52bps for non-hedged shares, and an AMC and OCF of 35bps and 56bps respectively for the hedged share class. The fund has a based currency of USD but is also available in EUR, GBP and CHF.
The launch comes in response to the pandemic and following unprecedented monetary and fiscal stimulus packages, which have "distorted the global bond markets and changed investor attitude towards risk", Pictet said.
"Not only are bond yields likely to remain low for longer, they have potential to have higher correlations to risky assets," it added.
"However, fixed income assets - and especially credit - should be an important building block for a diversified portfolio as they can provide attractive opportunities for long-term investors across the full business cycle."
Mawby explained that investors "need to rethink the role of bonds in their portfolios" and "be aware of the serious problems being stored up for the future".
He said: "It is even more important to work with the cycle, to be sensibly, and cautiously contrarian.
Speaking to Investment Week, Mawby said that fixed income investors have to be "more value driven and more contrarian" because the past two years have seen a market driven by "volatility cycles, versus the more fundamentally-driven economic and credit cycles that we have seen in the last 50 to 70 years".
He added: "That has been driven by intervention and the rhetoric of the central banks under counter cyclical monetary policy. That causes these pockets of volatility, so you have to ensure you have flexibility as a fund managers to take advantage of those pockets of volatility rather than be captive to them."
"If you are more contrarian and value-driven, you can really take advantage of these periods of volatility. It just means that you have to have the discipline to reduce risk into rallies to be able to navigate periods like Covid-19."