Pellous moves to the group from Invesco, where he spent over a decade as a high yield and emerging market fund manager. He previously held roles at Legal & General, AllianceBernstein and AXA Investment Management.

See also: Stuart Parkinson becomes Stonehage Fleming CEO

His appointment follows a series of new additions made to Aviva Investors’ fixed income team. It hired Gita Bal as head of fixed income research earlier this month, and poached Fraser Lundie as global head of fixed income in May last year.

Daniel McHugh, chief investment officer at the firm, said: “The appointment of Fabrice represents the latest step in our efforts to expand our fixed income investment team.

“Fixed Income is a central pillar of our public markets offering, and our ambition is to have a market leading offering across all major sectors of the asset class.”

PA Live: A world of higher inflation

Yes, mistakes were inevitably made. We can say (with hindsight) that central banks sowed too many magic beans in 2020. And interest rates were kept too low through 2021, when there was already evidence for rising inflation and tighter labour markets.

But most central bank criticism was grossly unfair. In 2022, the world came face to face with an unfriendly inflationary giant for the third time in two years. There was little else central banks could have done. Indeed, in 2023 the Bank of England (BoE)’s models suggested that even with a crystal ball in 2021 telling them what shocks were coming, interest rates would have needed to break double digits to keep inflation at target. Such a move would also have pushed the unemployment rate into double digits, posing grave financial instability risks.

Oh no you didn’t …

Almost three years on from Russia invading Ukraine and we see many global risk assets at record highs, credit spreads near record tights, inflation and inflation expectations close to, or at, target, and unemployment rates close to historical lows (and at an all-time low in the eurozone). Central banks’ mandates are hitting inflation targets, protecting financial stability and/or maximising employment. Investors should be casting central bankers as heroes, not the villains of the show.

But no fable is without its moment of adversity and indeed the greatest opportunities for active fixed-income fund managers come when central banks make mistakes, when markets misinterpret their guidance, or when markets behave irrationally. Right now there’s great potential for all three.

Today we have one of the greatest market and macro consensuses ever seen. Hopes for ‘US exceptionalism’ with 3% growth rates forever are rife: long US equities and tech, long US dollar, bearish US treasuries on an outright basis and/or relative to other markets. Such heroic optimism is reminiscent of the bullish emerging versus developed market narrative from 2010-12, and that didn’t end well.

To read the rest of the column, visit the January edition of Portfolio Adviser Magazine

Consensus expectations for core inflation had been a 30 point increase. Headline CPI rose two percentage points to 2.9% in December, in line with expectations.

The increase was fuelled by energy prices, which accounted for over 40% of the monthly rise, while food prices also contributed.

The data release follows on from UK inflation figures for December, revealed earlier today, which revealed an unexpected drop in headline inflation to 2.5%.

See also: ‘Not out of the woods yet’: UK inflation falls by 10 basis points in December

Hetal Mehta, head of economic research at St. James’s Place, said the US inflation data would come as a relief to a wide variety of policymakers as global yields move lower.

“Core inflation surprised on the downside and there are tentative signs that inflation pressures may have stopped building after months of acceleration. But headline inflation did tick up and more evidence of inflation moderation will be necessary to get the Fed comfortable with multiple rate cuts this year.

“We don’t think these data change our view of a soft landing, with growth moderating to a trend-like pace. The Fed has the firepower to cut rates if things do start to deteriorate materially.

“Overall, the outlook is still quite muddy as so much will depend on what the Trump administration comes up with policy wise (especially tariffs and immigration).”

See also: The undervalued markets where managers are diversifying away from the US

With all eyes on the bond market in recent weeks, treasury yields have ticked lower in early trading following the release of the inflation print.

“The US Treasury market, and global rates markets, breathed a sigh of relief as the US CPI contained few surprise. In fact, the small miss on core CPI was cheered on by the market, pushing bond yields sharply lower. Headline CPI was 2.9% year-on year,  bang in line with consensus but higher than the 2.7% reading in November,” said Aegon Asset Management investment manager Colin Finlayson.

“The small miss on Core CPI at 3.2% vs 3.3% – led by an easing back in core services prices – was welcome relief to investors after a relentless sell off over the last month.  For a market living on its nerves, anything other than an upside surprise was a ‘win’.  

“After the softer inflation data in the UK this morning, this has offered a crumb of support to bond market ‘bulls’ and was a reminder that things other than fears over fiscal spending and term premia can drive Government bond markets.  For the Fed, this keeps the path in rates still to the downside and has brought forward the pricing of the next cut from December – as it was after the recent employment report – to July.”

Tina Adatia, head of fixed income, client portfolio management at Goldman Sachs Asset Management, added: “After recent red-hot data, today’s softer than expected core CPI reading should help cool fears of a reacceleration in inflation.

“While today’s release is likely insufficient to put a January rate cut back on the table, it strengthens the case that the Fed’s cutting cycle has not yet run its course. With labour market data remaining robust, however, the Fed has scope to be patient and more good inflation data will be required for the Fed to deliver further easing.”

Meanwhile, the 10-year gilt has risen to its highest level since the great financial crisis.

The spike has led to concerns over the state of public finances, particularly following chancellor Rachel Reeves’s tax-raising Budget at the end of October. However, Laith Khalaf, head of investment analysis at AJ Bell, says that placing the blame solely on the chancellor is “probably wide of the mark”.

“Reeves’ maiden Budget was marginally inflationary, and did increase overall government borrowing, but since the beginning of October the US and UK 10-year bond yields have tracked upwards almost hand in hand.

“Those who think the current bout of bond market jitters is down to policies announced in the Budget need to explain why there has been such correlation in the upward march of bond yields both here and in the US.”

See also: ARC: Inflation leaves private portfolios 12% below 2021 levels

Fidelity International portfolio manager Mike Riddell agrees that the upward trend is mainly a global fixed income story.

UK gilt yields have moved broadly in line with US Treasuries over the last few months, while Riddell also points out that there has been a similar sized move in long dated German government bonds in the last month.

“That’s not to say that the UK has been immune to pressure,” he says. “Although there’s not any sign of a UK crisis yet, a worrying development in recent days is that gilt yields have risen a little more than in other markets, at a time when sterling has sharply weakened. 

“Normally currencies are driven by interest rate differentials, where higher gilt yields relative to other countries would be expected to push the pound stronger. The combination of a weaker pound and higher relative gilt yields has eerie echoes of August-September 2022, and if this continues, could potentially be evidence of a buyer’s strike or capital flight. 

“What’s been interesting about the global bond market moves of the past few weeks is that this is an unusual ‘bear steepening’ move, where longer dated bond yields have risen by more than short-dated yields. These moves are indicative of fixed income investors becoming increasingly concerned about fiscal largesse, and all the government bond supply that accompanies it. 

“It’s not about inflation concerns, where the market’s medium term inflation expectations are little changed since the beginning of November. Investors are instead demanding a higher risk premia or ‘term premia’ to compensate them for owning longer dated government bonds.”

Buying opportunity?

Among the implications of the gilt yield moves, refinancing debt has become more expensive.

“If this selloff continues,” Riddell adds, “it’s going to push deficits wider over the long, which then risks a doom loop since deficits need to be funded by ever more sovereign issuance. 

“But it’s also bad news for corporate issuers, or for example anyone who wants a fixed rate mortgage – a jump higher in the risk-free rate is a tightening in financial conditions, which will dent global economic growth. So if sovereign borrowing costs continue to surge higher, then risk assets such could start to come under substantial pressure.

“But the positive news it that the potential return from owning government bonds has just got a lot higher too. If you buy a 30-year UK government bond today and hold to maturity, then assuming no default of course, the total return over the life of the bond is almost 400%.” 

Richard Carter, head of fixed interest at Quilter Cheviot, says that gilt yields present an attractive opportunity for long-term investors.

“Despite this turbulence, gilt yields still present an attractive opportunity for long-term investors. Currently, they are well above expected inflation levels, making them a viable option for those looking to secure returns in a sluggish economy that might prompt further rate cuts by the Bank of England.

“For investors with a lower risk appetite, short-dated gilts still offer a promising avenue and are less sensitive to market fluctuations.”

Investors are on edge, grappling with uncertainty on multiple fronts as the US election fast approaches. With the outcome seemingly hanging in the balance, the potential impositions of blanket tariffs from a Trump presidency on all trade is concerning many. Such a move could spell trouble for the global economy, bringing potential implications for long-term geopolitical stability and fiscal discipline.

One significant tail risk we are monitoring is the impact of the US fiscal balance sheet. At around 4%, treasury yields are not overly concerning, but they reflect some uncertainty. While we do not anticipate a UK-like event in the US — a major bond sell-off akin to the Truss mini-budget moment — continued volatility in the bond markets leading up to and potentially beyond the election is likely.

While it is notoriously difficult to predict election results, and therefore subsequent policy of future administrations, the possibility of a Trump presidency focused on additional fiscal expansion and deregulation could push inflation higher, raising the yield of long maturity bonds as investors price greater long-run uncertainty in US bond markets. This ripple effect could inevitably be felt across the broader global bond market, as the US remains the benchmark for global fixed income.

See also: Morningstar: What does the US election mean for investing in China?

The potential imposition of blanket tariffs by Trump is especially concerning. While this could give a short-term inflationary boost to industries such as traditional energy, financials and defence, it could be disastrous for global growth over the long term. Take tariffs on China as an example. These have already led to a decline in US-China trade over the past few years and increased trade deficits with other countries. This rebalancing effect of blanket tariffs on US trade partners would complicate global trade dynamics.

The US economy has been sending mixed signals in recent months. The challenge lies in the core components of inflation, which seem inconsistent with the cut of over 1% the market expects from the Federal Reserve in the next 12 months. This creates a dilemma for the Fed, which must balance lowering inflation with a strong but potentially weakening labour market.

Historically, equity markets have shown more volatility during close and contentious elections. Given polling data indicates a tight race hinging on a few swing states, such uncertainty could spur heightened market volatility as investors react to polling trends and shifting political dynamics. While markets tend to calm after an election, investors should not assume smooth sailing in the immediate aftermath.

Policy changes, particularly those related to fiscal spending, taxation and regulation, could significantly impact sectors such as technology, energy and healthcare. leading to heightened market volatility as investors react to polling trends and shifting political dynamics.

Despite the noise, investors should remain steadfast: focusing on long-term fundamentals and preparing rather than predicting. Forecasting market responses to elections or economic data is fraught with risk. But discipline is needed — diversifying portfolios, managing risk and avoiding overreactions to short-term market moves.

While the election presents both short-term risks and opportunities, in line with past elections it is unlikely to have an impact on the medium-term expected returns of asset classes, but will stir potential short-term challenges.

While global bond yield curves may steepen globally pushing up longer term interest expectations, bonds remain an attractive asset class to hold with fears remaining around economic growth. We may also see volatility in equity markets as traders react to each other post-election, focus should be on the medium-to-long-term fundamentals — such as earnings and the discount rate — that will drive equity returns and ultimately client outcomes.

See also: Weekly Outlook: US election, UK and US interest rate decisions

Currency markets are also an area that may see volatility, especially if election results are delayed in swing states. However, we see little immediate threat to the US dollar’s status as the world’s reserve currency. Despite speculation, neither the euro nor renminbi are poised to replace the dollar.

Investors therefore should assess any risks within their portfolio and ensure they are resilient to adverse outcomes, while remaining flexible to seize opportunities that may arise during periods of extreme market stress.

Whether we face a Trump 2.0 presidency with potentially higher inflation or a Harris-led government which would likely be more of a continuation of the current administration, it is important to ensure that portfolios are diversified and robust.

By maintaining a disciplined, medium-term view and avoiding being swayed by the noise, investors can navigate the election with confidence, focusing on fundamentals rather than short-term volatility.

This article was first seen in our sister publication, PA Adviser

The index rose to 0.27 in November, signalling a fourth consecutive month of risk-seeking activity.

Long-term investor allocations to equities rose by 100 basis points to 53.8% in November, the highest level in 16 years. Investors sold down allocations to cash and fixed income, falling 20bps and 80bps respectively.

See also: PwC: ‘The pressure is on’ for AI to start delivering results

“While there are plenty of uncertainties about growth, policy and politics in the coming year, investor positions suggest their conviction in a US-led equity market rally is unflinching,” said Michael Metcalfe, head of macro strategy at State Street Global Markets.

“Not only is the overweight in equities high historically, it is also concentrated. Across the regions we track, the US is the only zone investors are currently overweight and it is a sizeable holding.

“By the end of November, holdings of US equities relative to the rest of the world were close to the most stretched in the 26-year history of State Street Global Market’s data set. In short from the point of view of long-term investor holdings, the US has rarely been so exceptional.”

Meanwhile, investors reduced weightings to European equities, with allocations falling to a new eight-year low after starting 2024 at a neutral positioning.

Demand for French bonds also suffered ahead of the fall of the French government. However, State Street’s Metcalfe said that investors remain overweight to other high debt countries in the Euro area such as Italy, which is a ‘telling sign’ of the lack of contagion for now.

The data comes as bond yields hit their highest level since the financial crisis. However, in the past year, the market has shifted rapidly. While the Bloomberg Global Aggregate index fell 3.6% from the beginning of the year to its trough in May, it now has a year-to-date return of 0.82%.

Although gilt yields spiked following the Autumn Budget, they have now largely settled to levels from before the announcement. In 2024, the Bank of England made two rate cuts to reach an interest rate of 4.75%.

See also: UK inflation jumps to 2.3% for October

In the US, treasury yields also lowered as Scott Bessent was chosen as US Treasury Secretary. While the Federal Reserve has cut interest rates twice this year for a total of 75 basis points, worries of inflation under a Trump presidency have caused uncertainty on how cuts will continue in 2025.

In its 2025 outlook, Vanguard priced in a rate of 4% by the year’s end, and Goldman Sachs expects a terminal interest rate of 3.25% to 2.5% for the Trump administration.

Jeremy Leach, chief executive officer of Managing Partners Group, said: “Fixed income funds have seen increasing inflows recently and this new research shows that institutional investors and wealth managers are set to significantly increase allocations over the next 18 months.

“Particularly as we enter a period of high volatility, the benefits of diversification and a regular income means fixed income is an increasingly popular choice for institutional investors and wealth managers.”

Most investors believe their allocation to bonds will rise by 10% to 15% in the next 18 months, while near a quarter see allocations rising beyond this share. Just 10% of investors believe allocation will increase by 10% or less. Currently, just 17% of investors say they are overweight fixed income.

See also: Will bond yields stay higher for longer?

The Aviva Investors Multi-Sector Private Debt LTAF will invest across the private debt spectrum, including real estate debt, infrastructure debt, structured finance and private corporate debt.

The strategy has received £750m of initial investment from Aviva’s My Future Focus default pensions solution, which invests in a broad range of asset classes on behalf of the firm’s range of auto-enrolment Defined Contribution default strategies.

See also: Analysis: Is the end of the magnificent seven nigh?

It adds to Aviva’s existing Real Estate Active LTAF, which launched in May 2023, and the conversion of its Climate Transition Real Asset fund to sit under the new regime in March.

Daniel McHugh, CIO at Aviva Investors, said: “We are pleased to add a dedicated private debt solution to our suite of Long Term Asset Funds, further positioning Aviva Investors as the largest provider of LTAFs for the UK DC and Wealth market.

“Private debt is a key growth area for us, and we believe our multi-sector approach will best-capture relative value through the market cycle.

“This should give it potential to deliver strong risk-adjusted returns and diversification to pension schemes, whilst also meeting their liquidity needs.”

According to the latest fund flow data from the Investment Association, published last week, the IA Corporate Bond sector saw the biggest sector inflows during the month of September at £904m, far outpacing the second best-selling sector’s net retail sales of £244m.

This is no surprise given where interest rates stand relative to history, with developed market central banks now heading towards a rate-cutting trajectory. As such, however, there has been some concern over recent weeks that credit spreads are tight relative to history.

But could prospects for bonds have become even more appealing since?

While in the UK, the Bank of England’s Monetary Policy Committee voted 8-1 to cut interest rates by 25 basis points last week, it warned that policies implemented during last month’s Autumn Budget could increase inflation by up to 50 basis points at its peak. Figures from the Office for Budget Responsibility also confirmed the policies will increase inflation and impact the previous trajectory for interest rate cuts.

Meanwhile, in the US, the likelihood of inflationary policies from incoming president Donald Trump could also mean interest rates remain higher for longer. This is despite a rate cut from the US Federal Reserve last week.

See also: AJ Bell’s Hughes: Why money will keep flowing into fixed income funds

Samer Hasn, senior market analyst at XS.com, said: “We are witnessing a gradual decline in the probability of the Fed cutting rates next January, reaching 20% ​​today [13 November] after exceeding 60% a month ago. Also, if the Fed cut rates in January, the probability of further a cut in March is only 11%, after exceeding 60% a month ago, according to CME FedWatch Tool figures.

“The diminishing likelihood of a rate cut next year has driven yields on two-year treasuries—highly sensitive to shifts in short-term interest rates and expectations—up at a faster pace than 10-year treasuries. This surge has propelled two-year yields to their highest level since July, reaching 4.33% today.”

As a result, he said bond yields may “ultimately become more attractive” as investors capitalise on yields that could remain higher for longer than previously anticipated.

“Additionally, rising risk appetite in the markets, exemplified by record highs in stocks and cryptocurrencies… could lead Wall Street portfolios to shift toward a blend of high-upside stocks and high-yield bonds.”

That being said, a report from Bank of America Global research, published on the 11 November by credit strategists Ionnis Angelakis and Barnaby Martin, wanted that credit spreads have become “another leg tighter” since the US election result.

Despite this, they believe strong inflows into fixed income – namely credit – are likely to persist into 2025.

“The need for quality yield is here to stay. In a world of diminishing yields in “risk-free” proxies, like government debt and money-market funds, we think that credit will remain the asset in demand,” the wrote. “A growth shock could cause the inflow trend to wobble at times in 2025, but as long as the rates market doesn’t make a U-turn, we see strong inflows as a regular theme next year.”

Using rate volatility and the prevailing level of yields, the strategists predict that flows into investment-grade credit will be “strong” at between 5-7% of AUM in 2025, if yields continue to decline.

See also: What does the gilt yield spike mean for UK bond prospects?

“We believe high yield will also benefit, but to a lesser extent, with flows of around 2.5-5% of AUM.

“Last but not least, there will be a clear decoupling between credit and government debt funds; the latter is likely to see more muted inflows of around 1.5-3.5% of AUM.”

Elsewhere, the research team at Square Mile said “cautious optimism” remains the dominant view among most fixed income managers that they speak with.

“In a climate of economic and political unpredictability, investors are increasingly turning to fixed-income funds as a strategic play for a more stable return profile,” the team said.

“The consensus at present is one of a “soft landing”, where growth slows without triggering a significant recession, although some managers commented that a “hard landing” remains within the realm of possibility. This creates both risks and opportunities for fixed-income assets.

“Trump’s victory may have profound implications for fiscal policy given his rhetoric around aggressive tariffs and immigration restrictions. Such policies may complicate the Fed’s ability to meet anticipated rate cuts, potentially leading to higher yields. Investors should consider that, while monetary policy is used to stimulate the economy, in developed markets the rate hikes resulted in relatively benign impacts as shown by the resilience in the US. This raises the question of whether the reaction to rate cuts may also be more muted than expected.”

From a duration perspective, the team said overweight positions in US and European interest rates look to be a popular strategy.

“Asset classes in favour are high yield, particularly in Europe due to cheaper valuations over the US, as well as emerging market debt and securitised assets. These asset classes are providing incremental and attractive levels of yield despite the tight credit spread environment.

“In the coming months, excess returns are more likely to come from carry rather than additional narrowing of credit spreads, i.e. capital appreciation. With spreads already compressed, focusing on yield seems to be the path most travelled in an attempt to offer a sustainable return profile.”

Despite the investment trust’s portfolio being made up of senior secured loans to large multinational companies— a world away from the subprime mortgage lenders that contributed to the Global Financial Crisis — retail investors minds can jump back to 2008 when thinking about credit, and Staelens says he is still asked about the downturn by investors.

“It’s very different to what we’re doing,” he says. “We lend to large companies, and you can track default rates going back for 20-30 years. What’s actually more important for us is loss rates because given where we lend, we have security over the assets, so even if there is a default we can sometimes recover all of our money.

“A lot of people ask me, ‘what about the outlook for defaults?’ Ultimately, defaults are bad for equity, because the equity gets wiped out. As a senior secured lender, we typically always have some recovery.”

The strategy offers exposure to senior secured loans and other sub-investment grade corporate credit in Western Europe and the US. Since launch in 2009, it has experienced one calendar year of negative performance.

The fund was rolled out as an investment trust in 2013 and is listed twice within the AIC Debt – Loans & Bonds sector, under its Sterling and Euro tranches. According to the AIC, it currently yields 8.16%.

Avoiding the losers

As part of the team’s investment approach, considerable focus is placed on downside risk.

“On the equity side, people are getting very excited about AI by trying to find the winners,” Staelens says. “We’re trying to avoid the losers, which are the business models that are going to be disrupted by AI and may not have a reason to exist anymore in a few years’ time.”

CVC Credit largely lends to private equity-owned companies, with the loans often used to fund M&A activity.

“If a company gets bought, or wants to buy something else, they come to our market. They say, ‘We want to borrow to buy this company’, and then we do our work. We look at cash flows and we’re always looking at downside scenarios.

“For instance, if the GFC happens again, or if Covid happens again, how would cash flows look in that situation, and what can the company do to preserve liquidity?

“We don’t have much of a look at upside, because that’s not really our concern. We just stress test the downside to see how much headroom there is to cover our debts.”

For this reason, Staelens’ team sticks to what he calls ‘boring’ companies.

“We don’t like to invest in companies that have exciting futures. Typically, they invest a lot in capex and growth and they don’t generate cash. We like to invest in ‘boring’ companies that generate cash flow, because it’s the cash flow that pays the coupon and pays down our debts over time.

“Our biggest exposure is usually healthcare. We know the demand is always going to be there.

“We like anything which has predictable cashflows – we have some exposure to McAfee, the cyber security company. It doesn’t matter how good or how bad the economy is, people will want their computers protected against viruses or cyber attacks.

“It’s businesses with predictable cashflow — we don’t want businesses to invest all the profit they generate on some amazing AI growth projects.”

Loans versus bonds

The onset of interest rate rises over the past 18 months has caused renewed interest in the fixed income portion of portfolios.

Now that interest rates are beginning to move downwards, Staelens explains that if inflation is stickier and base interest rates don’t fall as quickly as the market is pricing in, then floating rate credit will outperform.

The floating rate coupons the trust invests in reset in line with base rate movements quarterly.

“If you lock in your coupons for three or five years [in a high yield bond fund] and inflation sparks again, then your coupon may not be enough to keep track with inflation.

“If inflation drops materially and base rates come down, then having locked in these long coupons will help investors.

“They’re two different products, but I think having a balance with maybe some high yield and some floating rate exposure will help investors in building a balanced portfolio.” 

The £742m L&G Strategic Bond, which is co-managed by Colin Reedie and Matthew Rees, predominantly invests in corporate bonds, and is able to hold either investment grade and sub-investment grade fixed-income securities, so long as they have credit ratings from a recognised rating service. The fund must maintain a net exposure of at least 80% to sterling at any one time.

Over three years, the fund has returned 10.7% compared to its IA Sterling Strategic Bond sector’s average loss of 0.8%.

See also: Square Mile removes Jupiter Global Value rating on Whitmore exit

The RSMR team said: “This fund leverages the exceptionally strong fixed income platform at LGIM, benefiting from high level input from across the vast team, comprising fixed income managers, researchers and economists, as well as the meticulous bottom-up proprietary credit research carried out by the analysts.

“The managers have built a strong track record, having developed a repeatable and pragmatic investment proposition.”

Dodge & Cox Global Bond, which is an Ireland-domiciled ICVC, is $556.3m in size. It has returned 8.6% over three years, compared to its average peer in the offshore global fixed income sector’s loss of 0.4%.

The fund is able to invest across the full spectrum of global bond markets, with the team taking at least a five-year view on the securities they hold. While there are no limits on duration or currency within the mandate, other than to be regionally diverse, its investment-grade allocation is capped at 25%.

RSMR explained that Dodge & Cox is a “valuation sensitive” asset manager across all asset classes, and that fixed income “is no exception”.

“The philosophy is to be flexible and index-agnostic using three main levers: currency, interest rates and credit. It has a team-based approach run by committees of senior investment professionals with a coherent succession policy.

“Dodge & Cox offers a style of investing that will generally work well when valuation is recognised as a significant factor rather than momentum, but it is very conscious of including some diversification to provide some offsets.”

The third fund to be awarded a rating is the Dublin-domiciled Royal London Global Bond Opportunities fund, which invests across investment-grade, high-yield and unrated global corporate bonds.

See also: 20% of funds face rerating as Morningstar alters rating methodology

Co-managed by Eric Holt and Rachid Semaoune since its launch in 2015, the £302.8m fund has returned 10.7% over three years, compared to its IA Global Mixed Bond sector average’s loss of 3.1%.

The RSMR team said the fund was created so that the Royal London fixed income team could to apply their skills to managing “a truly global mandate that invests largely in credit, with a view to delivering a high level of income from a well-diversified portfolio”.

“We have known the highly-regarded Royal London fixed income team for many years and are impressed by its expertise and the extent to which it has produced consistently strong relative returns across a wide range of mandates on a regular basis.”

In a stock exchange announcement this morning (4 November), the board said that it had been notified by investment manager Weiss Asset Management that it believes the opportunity set for the fund continuing in its current form is “less attractive than it has been in the past”, and that it does not think it is likely to improve in the foreseeable future.

See also: CRUX’s Richard Penny joins Oberon Investments

In response, the board has launched a strategic review to consider the future of the company.

The trust, which invests primarily in listed South Korean companies, was first launched in 2013.

According to the Association of Investment Companies, the trust currently trades at a 1.36% premium to its net asset value.