Guernsey will be home to the only closed-ended fund listed in the UK that is focused solely on investing in convertibles.
JP Morgan Asset Management has confirmed the launch of its new Guernsey-domiciled investment company, JP Morgan Global Convertibles Income Fund, which has an offer for subscription until 5 June.
Antony Vallee, head of convertibles at JP Morgan Asset Management, said: "We have specifically chosen a closed-ended structure for this fund in order to be able to offer an attractive level of yield. Open-ended portfolios need liquidity, and they tend to get this from holding bonds issued by very large, liquid companies, which tend to issue bonds with relatively low levels of coupon. As a closed-ended fund has a stable pool of capital that is less affected by inflows and outflows, the requirement for liquidity at the portfolio level is lessened, and we can therefore focus on convertible bonds offering a higher level of income, such as those issued by small and mid cap companies."
The Guernsey-domiciled investment company will give investors access to a globally diversified portfolio of convertible securities from a broad range of sectors, offering income alongside the potential for long-term capital growth, the firm said.
"Five years ago there were many cheap ways to access yield and growth potential, and in an environment when bond yields were high and equity prices depressed, convertibles were not popular. But since the global financial crisis, plenty of companies have issued convertibles and UK investors are becoming more familiar with them again. As such, we think demand for convertibles as an asset class will increase. This year alone, we have already seen $26.7 billion of convertibles issued, which at an annualised rate would equate to $80.2 billion, more than was raised in 2012 or 2011," said Mr Vallee.
JP Morgan said that the new company will target an initial gross dividend yield to shareholders of 4.5 per cent in the first financial year and will be managed by JP Morgan Asset Management's convertible bond team, headed by Mr Vallee. The vehicle carries a management fee of 0.75 per cent per annum on net assets, and there is a minimum investment of £1,000 (around $1,500) under the offer, and multiples of £1,000 thereafter - with no maximum investment limit. The company is eligible to be held in an individual savings account.
JP Morgan Asset Management added that the new JP Morgan Global Convertibles Income Fund is expected to begin trading on 11 June.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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