Spectrum Asset Management, Principal Asset Management’s preferred and capital securities investment manager, in partnership with Principal Asset Management, has launched two Article 8 Ucits funds on its Irish platform.
The Principal Capital Securities Fund, aimed at Euro-focused fixed income investors, will invest in Euro-denominated capital securities and hybrids issued predominantly by European banks, insurance companies and corporates.
The majority of the fund’s investments will be rated as investment grade quality and benefit from non-financial diversification and modest exposure to contingent convertible bonds.
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The other offering, the Principal High Grade Capital Securities Fund, will invest in an all-investment-grade portfolio of Euro-denominated capital securities and hybrids, primarily issued by European banks, insurance companies, and corporates.
It targets Euro-focused fixed income investors across various sectors including wealth, insurance, pension and third-party distribution. In contrast to the other fund, this will not have any exposure to contingent convertible bonds.
Both the Ucits funds are classified as Article 8 ( (products that promote environmental or social characteristics) under the EU’s Sustainable Finance Disclosure Regulation.
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According to the asset managers, the Euro-denominated capital securities sector presents an opportune option for investors aiming to boost their allocation to high-grade, higher-yielding fixed income.
“Major central banks are likely to cut interest rates in 2024, paving the way for attractive yields. Preferred and capital securities are in a position to outperform this year,” commented Mark Lieb, president and chief executive officer, Spectrum Asset Management.
