Psigma Investment Management invests in TwentyFour Asset Backed Income Fund
Psigma Investment Management (PIM) has seeded a new fund for its clients with TwentyFour Asset Management.
This follows Psigma’s move last year to create and design the TwentyFour Focus Bond Fund with TwentyFour to take advantage of selective opportunities in corporate fixed interest investments with a finite redemption life before end-2016.
Tom Becket, chief investment officer, Psigma Investment Management, says: “We have invested in the TwentyFour Asset Backed Income Fund to take advantage of an opportunity we see in Residential Mortgage Backed Securities (RMBS) and Asset Backed Securities (ABS), where the managers are able to put together a portfolio of predominantly investment grade assets with a healthy starting yield in excess of eight per cent. There are precious few exciting yield opportunities remaining in fixed interest markets and we believe that this is as compelling an investment opportunity as we can find across global markets. The bonds that the managers buy also have floating rate coupons, which can move higher to reflect changes in LIBOR. When interest rates start to rise from current historically low levels it will be positive for RMBS and ABS. This is particularly attractive given the paltry yield and lack of inflation protection offered by government bonds, investment grade corporate credit and (most recently) high yield credit. We strongly believe that it is vital for investors to start thinking about a rising interest rate/ inflationary environment now, whilst pockets of attractive ‘inflation insurance’ remain.
“The opportunity in this sector is particularly attractive at this time, given the developments at the banks. Banks have historically held a large proportion of these assets on their balance sheets, with many assets still held on their balance sheets marked at the low prices of 2008. Banks are now starting to sell some of these bonds, freeing up capital and booking welcome profits from the cheap 2008 levels. Nimble investors can still pick up some excellent bargains from the banks, particularly if they are willing to invest in smaller issues and those bonds rated below AA. The highest rated assets have already benefited from a surge of investor appetite from “the hunt for yield” and we expect the lower rated, higher yielding assets to be the next beneficiaries. It is exactly in this fertile hunting ground that TwentyFour will be investing.”
Mark Holman, managing partner of TwentyFour, says: “We are delighted to be working again with Psigma, and to be able to tailor a Fund that specifically meets their requirements. This is an asset class where we see significant value and expect further client demand. We are currently marketing the closed-ended ‘TwentyFour Income Fund’ with Numis that will invest in less liquid European ABS. The TwentyFour Income Fund is due to close in February and we are targeting raising between GBP100m and GBP250m.”
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