The fund aims to provide a combination of capital growth and income to deliver a return that is higher than that of the global convertibles market over any five-year period.
Investment policy and strategy
Core investment: At least 70% of the fund is invested in convertibles issued by companies from anywhere around the world, including emerging markets*. The fund also holds company shares in combination with bonds in order to replicate the exposure to convertibles when a direct holding is not available. Company shares are also held to adjust the technical characteristics of individual convertibles, such as making them more sensitive to changes in the price of the shares into which they convert. The fund can also use derivatives rather than company shares for both purposes.
Other investment: The fund also holds cash or assets that can be turned quickly into cash.
Use of derivatives: The fund typically invests directly, but may also invest indirectly via derivatives. Derivatives may also be used to manage risks and reduce costs, as well as to offset the impact of currency exposures arising from the fund’s investments.
For more information on the types of bonds held and derivatives used, please refer to the Prospectus
* Emerging market countries are defined as those included within the MSCI Emerging Markets Index and/or those included in the World Bank’s definition of developing economies, as updated from time to time.
Strategy in brief: The investment manager aims to take advantage of the special characteristics of convertibles, which can participate more in share price increases than falls. The investment manager selects investments based on an assessment of company-specific factors and technical characteristics of convertibles. Spreading investments across issuers, industries and countries is an essential element of the fund’s strategy and the investment manager is assisted in the selection of individual bonds by an in-house team of analysts.
Performance comparator: The fund is actively managed. The Thomson Reuters Global Focus Convertible Index is a point of reference against which the performance of the fund may be measured.
Bonds: Loans to governments and companies that pay interest.
Convertibles: Bonds issued by companies that usually pay a set rate of interest and which can be exchanged for predetermined amounts of company shares.
Derivatives: Financial contracts whose value is derived from other assets.
Risks associated with the fund
The value of investments and the income from them will rise and fall. This will cause the fund price, as well as any income paid by the fund, to fall as well as rise. There is no guarantee the fund will achieve its objective, and you may not get back the amount you originally invested.
Changes in currency exchange rates will affect the value of your investment.
The fund may use derivatives to gain exposure to investments exceeding the value of the fund (leverage). This may cause greater changes in the fund’s price and increase the risk of loss.
The fund may use derivatives with the aim of profiting from a rise or a fall in the value of an asset (for example, a company’s bonds). However, if the asset’s value varies in a different manner, the fund may incur a loss.
When interest rates rise, the value of the fund is likely to fall.
The value of the fund may fall if the issuer of a fixed income security held is unable to pay income payments or repay its debt (known as a default).
If the share class is hedged (H share class), it aims to mirror the performance of another share class. We cannot guarantee that the hedging objective will be achieved. The hedging strategy will limit holders of the hedged share class from benefiting if the hedged share class currency falls against the US dollar.
The fund will invest in emerging markets which are generally smaller, more sensitive to economic and political factors, and where investments are less easily bought and sold. In exceptional circumstances, the fund may encounter difficulties when selling or collecting income from these investments, which could cause the fund to incur a loss. In extreme circumstances, it could lead to the temporary suspension of dealing in shares in the fund.
Where market conditions make it hard to sell the fund’s investments at a fair price to meet customers’ sale requests, we may temporarily suspend dealing in the fund’s shares.
Some transactions the fund makes, such as placing cash on deposit, require the use of other financial institutions (for example, banks). If one of these institutions defaults on their obligations or becomes insolvent, the fund may incur a loss.
The Fund allows for the extensive use of derivatives