Schroders' fund capitalises on high credit spreads

Schroders aims to capitalise on the low price of corporate bonds as it expressed confidence that market forces will favour its new corporate bond offering.

Albert Tse, Head of Retail Distribution, Schroders Singapore, pointed out that corporate bonds look cheap as the difference in yield between corporate bonds and government bonds—the credit spread—is at historic highs. "And now that spreads are at historic highs, investors including pension funds, insurance companies, and private bankers are looking at buying the asset class," he noted during the launch of the Schroders ISF Global Corporate Bond.

"This is a great time to be investing in corporate bonds for those investors who pick the survivors and avoid the defaulters. It is not going to be a one-way ride for every bond," said Tse.

The Schroders fund aims to provide a return of capital growth and income primarily through investment in a portfolio of bonds and other fixed and floating rate securities denominated in various currencies and issued by governments, government agencies, supra-national and corporate issuers worldwide.

It will be distributed by Citibank, Standard Chartered Bank and selected Independent Financial Advisors (IFAs).

"Indeed, the difference in performance between the 50 best-performing and the 50 worst-performing bonds will be huge over the next two years as the market decides who will survive and who will default," said Tse.