13 September 2012

New Fund: OSK-UOB Focus Bond Fund - Enhanced

In view of the current volatile markets culminating from the Eurozone debt crisis, investors are concern about the contagion effect on the domestic and global economies. Amid the recent volatility, some believe there are opportunities arising from bond investments that will offer consistent and regular income to investors. Hence, OSK-UOB now offer investors an enhanced bond fund that has the potential to provide higher regular income^ during the tenure of the Fund and capital appreciation at its maturity date from a concentrated portfolio of global debt instruments / bonds and from an option structure to provide the potentially higher income.

The OSK-UOB Focus Bond Fund – Enhanced (“the Fund”) is a 3-year close-ended, income fund which aims to provide regular income during the tenure of the Fund and capital appreciation at its maturity date primarily from a concentrated portfolio of global debt instruments / bonds. Generally, the Fund aims to achieve its objective through a two-fold strategy.

  1. Fixed Income portionThe first is to invest in a concentrated portfolio of fixed income securities to provide a stable income stream. In managing the fixed income portfolio of the Fund, the External Investment Manager will generally seek out global debt instruments / bonds that are able to offer attractive yields (i.e. yields that are greater than the Fund’s benchmark net of expenses) and/or capital appreciation during the tenure of the Fund. Given the Fund’s 3-year tenure, the External Investment Manager will invest in a concentrated portfolio of not more than 20 global debt instruments / bonds to lock-in the yield.
  2. Option portionThe Fund will also invest in a 3-year OTC call option that is referenced to a yield enhancement strategy (YES). The YES Option is denominated in Singapore Dollar (SGD) and the Fund will have 150% Participation Rate in the YES Option’s annual returns. As the tenure of the Fund is 3 years, the YES Option is designed to provide 3 annual coupon payments during the 3 years tenure of the YES Option. As such, there will be 3 observation periods for the determination of the performance of the YES Option (i.e. the 3 annual coupon payments).

Its indicative asset allocation is as follows:
  • 92% - 100% of Net Asset Value- Investments in global debt instruments/bonds.
  • Up to 3% of Net Asset Value- Investments in the YES Option.
  • Up to 5% of Net Asset Value- Investments in liquid assets including money market instruments and deposits with financial institutions.
^Note: The income (if any) is in the form of cheque payments.

Source: OSK-UOB Investment Management


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