Bestinvest says
We believe short dated high yield bonds are ideally suited to the current environment due to a combination of lower interest rate sensitivity and reasonably attractive risk premiums. Income levels are also reasonable although not as high as those available from traditional high yield bond funds.
The fund aims to identify companies with improving credit trends and strong operating fundamentals through credit intensive investment research. It invests in sub investment grade, corporate debt securities with a maturity or call date of three years or less issued by companies with their predominant place of business in the US. The nature of the portfolio means that it focuses very much on buying securities in the secondary market as opposed to participating via new issues. Market liquidity and bid offer spreads at the desired maturity points tend to be more attractive relative to the broader high yield bond market. Performance generation comes primarily from security selection while duration management and yield curve positioning are secondary drivers. The fund manager will manage duration to reflect market conditions; historically the percentage of the fund investment in bonds with a maturity of less than three years has ranged from 30-70%. The fund currently only uses derivatives to hedge out the currency risk borne by investors in the non-dollar share classes of the product.