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
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.
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