Prudential Investments has launched the Prudential Short Duration Multi-Sector Bond Fund, a fixed income strategy with the potential to perform well in a rising interest rate environment.
Prudential Investments is the mutual fund business of Prudential Financial, offering a range of open and closed end funds.
The fund invests in a diversified portfolio of fixed income securities including, asset-backed securities, bank loans, corporate debt securities, commercial mortgage-backed securities, high yield and investment grade debt, collateralised debt obligations, US Government debt and foreign debt. The fund seeks to maintain weighted average portfolio duration of one to three years and uses the Barclays US Government/Credit 1-3 Year Index as a benchmark.
"There are still plenty of opportunities in the fixed income markets, even in an uncertain interest rate environment," says Stuart Parker, president of Prudential Investments. "With this new fund, we're aiming to provide investors with competitive returns while addressing concerns for interest rates and the ongoing search for yield."
The fund is actively managed by Prudential Fixed Income's core plus team, which includes Mike Collins, Richard Piccirillo and Robert Tipp using a collaborative fundamental, bottom-up, research-based subsector and security selection process. The portfolio managers also run the USD2.7bn Prudential Total Return Bond Fund and the USD1.8bn Prudential Absolute Return Bond Fund.
Demand for lower duration fixed income products, which tend to be more defensive in a rising interest rate environment and also offer the potential for competitive yield, has steadily increased over the past several years as risk-averse investors remain wary in this uncertain interest rate environment.
"In terms of the market cycle, we find that the point in an economic recovery when investors' fear of Fed tightening flares-up often represents a good point to add to fixed income exposure," says Collins. "The right opportunities may yield significantly higher returns than cash, guard against a potential rise in rates and offer investors portfolio diversification.
"We expect solid performance from the higher-yielding, credit sensitive fixed income products, including high yield, emerging markets, structured products, as well as investment grade corporate and medium grade municipal bonds."
The fund is available in the following share classes: A: SDMAX, C: SDMCX, Q: SDMQX, Z: SDMZX.