US-based investment manager Neuberger Berman has rolled out an Ucits strategy focusing on the non financial corporate hybrid debt asset class.
Dubbed as the Neuberger Berman Corporate Hybrid fund, the new strategy has been seeded with $21m and will be managed by Julian Marks and David Brown.
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The product has been designed to achieve alpha over the long term by investing in the corporate hybrid debt market at the early stages of its growth.
The hybrid debt fund, which is a sub-fund of the Irish-domiciled UCITS fund umbrella Neuberger Berman Investment Funds, will be registered for sale shortly across the UK, Europe and Asia.
The hybrid market currently sits at $120bn, with forecasts for new issuance of $25bn to $30bn.
"Accounting for around 3% of Euro Investment Grade credit indices, liquidity is strong in corporate hybrid bonds and interest in the asset class is increasing," the company said.
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By GlobalDataNeuberger Berman global credit portfolio manager Julian Marks said: "The hybrid universe offers an opportunity to access investment grade names whilst earning returns commensurate with the high yield market.
"The incremental yield offered relative to senior unsecured debt presents an attractive way of enhancing performance in the current low-yield environment.
"We believe these bonds are currently trading on average over 100bps wide of fair value. Also, we believe the large amount of new issuance is likely to continue coming at a discount, providing an additional source of return.
"However, due to the relatively complex nature of these instruments, investing in corporate hybrids requires specific expertise, including a thorough credit assessment and an in-depth analysis of the issue features, in order to reach a conclusion as to a fair valuation."
