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Fixed Income Alpha Fund Raising

21 March 2006

Aberdeen’s Fixed Income Alpha Funds receive warm reception

Aberdeen Asset Managers Ltd has already seen inflows of over £75 million (€110 million, SEK 1 billion) into its recently launched Fixed Income Alpha Funds range. The series of funds, established in November 2005, offer Liability Driven Investment (LDI) strategies to UK and European institutional clients.

The majority of inflows so far have been into the 50-year conventional and index-linked sterling funds. This market is very much in its infancy but there are strong reasons why these strategies have proved attractive: an ageing population with a smaller labour force yet higher pension and healthcare expenditures; a need for long dated securities to address potential asset/liability mismatches of pension funds and insurance companies; and, an insufficient supply of prime quality long dated securities.

Furthermore the funds have proved particularly popular with smaller institutional clients searching for a pooled fund rather than segregated portfolio solution. For smaller schemes, using pooled funds is far more efficient and cost effective.

The funds provide investors with exposure to an actively-managed portfolio of global fixed income securities constructed to generate above average returns overlaid by a tailored derivative-sourced duration strategy. The new funds target an annual outperformance of 2% relative to their respective benchmarks.

The Dublin-domiciled vehicle invests in a wide range of bonds – global government, investment grade, high yield and emerging market debt. In addition, a series of interest rate and currency overlays are used to add additional performance.

Since clients will want to tailor their exposure to certain markets and maturity profiles, the Fixed Income Alpha Funds range offers this flexibility. Using swap overlay strategies, a number of sub-funds have been launched. These offer clients returns hedged back to Sterling, Euros or Swedish Krona combined with different target durations and inflation protection.

The Fixed Income Alpha Funds range has a number of attractive features which complement Aberdeen’s existing range of pooled funds for institutional clients. In particular they offer:

  • High outperformance targets in fixed income;
  • The ability for the duration of assets to be matched more closely with liabilities; and
  • Access to swap overlay strategies through a pooled fund wrapper

Dominic Delaforce, Co-head of Liability Driven Investment at Aberdeen, comments:

“The interest the Fixed Income Alpha Funds range has sparked is very encouraging. The range provides schemes not only with the tools to help them efficiently match their pension fund assets to their liabilities, but they also have the flexibility to adjust their investments if the liabilities should happen to change at any stage in the future – both quickly, easily and cost-effectively.

“Moving to an LDI structure no longer means schemes are restricted to tying up assets in a low yielding immunised portfolio. Small schemes needn’t be penalised by cost and implementation issues if they choose appropriately structured pooled fund investments.”

For further information, please contact:

James Thorneley020 7463 6323
Aberdeen Asset Management
Charlotte Barker/Tom Siveye020 7379 5151
The Maitland Consultancy

Issued and approved by Aberdeen Asset Managers Ltd, authorised and regulated by the Financial Services Authority. For professional use only and not for public distribution.