Enhanced Investment Products launched its Asian High Yield Convertible Bonds launched with an initial investment of US$17 million.
EIP's new fund has been launched to take advantage of the high yields currently on offer in Asian convertible bonds. It is long biased and does not pursue an arbitrage strategy but seeks to enhance the investment through delta hedging and trading the optionality embedded within each bond position.
It is the second fund in its portfolio of products that offers absolute returns after the EIP Overlay fund which concentrates on non-directional arbitrage trading.
The fund has a life of three years, monthly liquidity after one year and an automatic liquidation trigger with return of proceeds to investors when NAV increases 70 percent from inception. Performance fees are only paid on crystallised profit.
If yields remain attractive, a second tranche of this fund will be offered to interested investors in the third quarter of 2009.
"Launching a new fund in this current economic climate is testament to our strong performance in 2008 and the excellent investment team we have been building up over the past year. In addition, our distribution capability has been significantly strengthened by our business partnership with Triple A Partners," said Tobias Bland, CEO of EIP.
Yvon Choi, Senior Portfolio Manager at EIP said: "With regards to risks the fund will hedge interest rate risk exposure to protect against rises in rates during the life of the fund. The fund will hold a diversified basket of holdings, no more than 20 percent in any one industry sector or country and no issuer will represent more than 8 percent of the fund NAV. The seed investment will kick start the fund, and we aim to provide investors with a solid annual return of around 10-20 percent with low volatility compared to pure equities."
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