Asset management unit relaunching high-income fund as floating-rate fund; such offerings have seen record inflows on inflation worries
Credit Suisse Asset Management is the latest firm to get into the floating-rate bond fund market.
The firm is re-launching its $80 million Credit Suisse High Income Fund as the Credit Suisse Floating Rate High Income Fund Ticker:(CHIAX).
Bank loan funds have seen record inflows over the past year and half as investors have sought yield in the fear that inflation will rise, said John G. Popp, managing director at CSAM.
Bank loan funds invest in loans with yields that adjust every 60 days. As a result, the funds aren't as vulnerable to the negative effects of rising interest rates as traditional fixed-income funds.
Bank loan funds saw net inflows of $16.15 billion last year and have brought in $17.63 billion this year of April 30, according to Morningstar Inc.
“Post-financial crisis, the loan asset class has attracted more attention from the traditional types of investors,” Mr. Popp said.
As a result of this increased interest, fund companies have been rushing to launch bank loan funds. Since January 2009, eight bank loan funds have come to market; four of those were launched this year, according to Morningstar.
CSAM, however, thinks that it can differentiate itself from its peers because its management team has been overseeing loans for several years, and the fund already has a strong performance record, Mr. Popp said.
“Most loan managers coming into the Street probably weren't around 10 years ago,” he said, noting that CSAM's managers have been overseeing loans for 14 years in different formats.
Also, the firm has teamed with Piedmont Capital Distributors to sell the fund, marking the first time that CSAM's credit group has tapped a third party to help sell an open-end mutual fund.
“I think we needed to try to be aggressive in this space,” Mr. Popp said.
Although the composition of the fund is changing, it won't be a very dramatic shift in investment philosophy, he said.
“This is really more of a shift toward an emphasis on floating rate than a shift on the underlying credit exposure within the fund,” Mr. Popp said.
Given the increased interest in floating-rate funds, it makes sense for CSAM to re-launch the high-yield fund, said Sarah Bush, an analyst at Morningstar.
“The two funds require the same skill set, and it's a very popular asset class,” Ms. Bush said, adding that the floating rate category is a bit more popular than high-yield bonds these days, given that it isn't as vulnerable to interest rate risk.
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