Investors hungry for higher returns are increasingly seeking advice around how to switch from fixed income to cash benchmark products without sacrificing yields, a fund manager says.
However, there are few products offering both in the Australian landscape, despite the growing appetite, according to Vimal Gor, BT Investment Management's head of income strategies.
"Every conversation I have with clients and consultants at the moment is about what they should do with their fixed income benchmark products because they're worried about the lower level of bond yields," he said.
"I think that over the short run, with the Fed dialling back and tapering expectations, that bonds are very well supported here and have the chance to rally, but over the long term they don't offer any compelling value."
Speaking to Money Management after the soft launch of BTIM's new alpha fund, Gor said his team sought to introduce an option to balance fixed income's alpha-generating capability without underlying exposure to bonds.
The Pure Alpha Fixed Income Fund was launched late last year and has been recently gaining traction in the retail space.
Unlike its institutional counterparts, it takes into account the future direction of markets, instead of current positions. It generates income by investing in fixed interest, credit and foreign exchange markets.
"This product can play two roles in a portfolio, as an alternative for standard fixed income funds with benchmarks or it can be viewed as a defensive cash-plus proxy."
The fund received a 'recommended' rating from Zenith and Gor said over the next few months he expects interest from clients to grow substantially.
"Generally we would expect over the coming months and quarters that we would get a lot of demand in this product," he said.
"We're seeing a significant increase in inquiry in the institutional space as people get worried about their bond yields, so obviously if you're looking to move out of any composite funds, this would be a good alternative."
