Independent financial services group Dixon Advisory has launched a fixed-income fund aimed at giving retail investors an avenue to invest in credit instruments that have traditionally been open to institutional investors only.
The new offering, known as The Australian Masters Yield Fund No 1 Limited (AMYF), will be unlisted and initially issue 500,000 shares at $100 each. Dixon Advisory is looking to raise up to $50 million before over-subscriptions.
"The fixed-income market continues to present investors with attractive investment opportunities. Despite the tightening of credit spreads since the global financial crisis, there remain elements of the fixed-income universe which present investors with attractive risk-adjusted returns," AMYF chair Max Walsh said.
One of the objectives of the new fund is to take advantage of fixed-income investment opportunities that lie outside high-grade corporate bonds.
"Structural supply and demand dynamics stemming from global economic uncertainty are contributing to a disproportionate dispersion of credit spreads across the rating spectrum. As investors flock to the relative safety of high-grade corporate credit, spreads at the lower end of the credit spectrum still remain attractive," Walsh said.
"For example, BBB-rated corporate bonds traded at an average of 100 basis points in the five years prior to August 2007, reached a height of 360 basis points in 2008 and now remain at around 260 basis points - 160 basis points above their five-year average leading up the global financial crisis - whereas higher-grade corporate bonds are only providing investors with rates close to term deposit levels," he explained.
"This means that there are very attractive opportunities for investors who are prepared to invest a bit more broadly than simply in high-grade corporate bonds."
Applications totalling more than $30 million for the fund have been received and the offer closes on 2 December 2010.
