Ultra short bond funds

What are the ultra short bond funds?

The ultra short bond funds range was first launched in 2005 as a complement to the existing range of institutional liquidity funds. The ultra short bond funds are available in Euro, Sterling and US Dollars and offer investors the opportunity to increase the yield potential of their longer term cash investments.

The ultra short bond funds are total return funds. The Funds aim to provide investors with a good level of liquidity coupled with a focus on capital preservation over a cycle, albeit with some degree of price volatility and the possibility of negative performance in the short term. In the pursuit of increased yield, the investment guidelines of the Funds allow for a longer duration and broader range of security types than the institutional liquidity funds would.

For what type of investor could the ultra short bond funds be appropriate?

The ultra short bond funds should not be considered as an alternative to a triple-A rated Money Market Fund, rather as an extension of your cash investment strategy. The Funds would be most suitable for an investor who is in a position to clearly separate their working capital, which has a very short-term investment profile and may need to be drawn on daily, from their strategic cash which has a longer outlook (typically at least 12 months) and is not required for day to day business use. Given this clear cash profiling, investors may be seeking greater yield from their strategic cash – whilst wanting to remain in a conservatively managed portfolio which provides them with the flexibility of easy access to their assets if required.

In what types of securities do the ultra short bond funds invest?

As with the institutional liquidity funds range, the ultra short bond funds are managed within strict risk management guidelines, ensuring that only those securities which have been thoroughly analysed by our highly experienced team of credit analysts are selected for the Funds. The ultra short bond funds use a variety of short to medium term debt instruments of high quality and liquidity [there is no guarantee that an instrument will always remain of high quality/liquidity], they may include:

• Asset Backed Commercial Paper
• Certificates of Deposit
• Commercial Paper
• Corporate Obligations
• Euro Bonds
• Floating Rate Notes (FRNs)
• Government Bonds
• Government Guaranteed Debt
• Supranational Bonds
• Time Deposits
• Treasury Bills

Capital growth / income variation:

Investors in these Funds should understand that capital growth is not a priority and values may fluctuate and the level of income may vary from time to time and is not guaranteed.

Financial Markets, Counterparties and Service Providers:

The Funds may be exposed to finance sector companies, as a service provider or as counterparty for financial contracts.   Liquidity in the financial markets has been severely restricted, causing a number of firms to withdrawn from the market, or in some extreme cases, becoming insolvent.  This may have an adverse affect on the activities of the fund.

Interest Rate Risk

The fund invests in fixed interest securities such as corporate or government bonds which pay a fixed or variable rate of interest (also known as the ‘coupon’) and behave similarly to a loan. These securities are therefore exposed to changes in interest rates which will affect the value of any securities held.