BNY Mellon Investment Management: Launch of three efficient fixed income beta funds

BNY Mellon Investment Management: Launch of three efficient fixed income beta funds

October 6, 2020

Fixed Income

BNY Mellon Investment Management announces the launch of three new funds as part of its growing efficient fixed income beta franchise. Available via the Irish-domiciled fund range, BNY Mellon Global Funds, plc, the funds aim to address inefficiencies such as high turnover (40% or more) and high transaction costs in fixed income that make it very difficult for both active and passive managers to deliver index returns.

The BNY Mellon Efficient Global IG Corporate Beta Fund, BNY Mellon Efficient US Fallen Angels Beta Fund and the BNY Mellon Efficient Global High Yield Beta Fund will join the existing efficient beta fund franchise. It has a total AUM of $8.8bn as of 30 June 2020, and includes the BNY Mellon Efficient U.S. High Yield Beta Fund, which has attracted approximately $1.1bn in assets since its launch in 2017.

The funds will be managed by Mellon Investments Corporation (Mellon), an investment firm of BNY Mellon Investment Management with a history of innovation in indexing and in fixed income trading, and managing quantitative active strategies.
‘Efficient beta’ refers to the innovative techniques used to try to achieve competitive index-like or better returns (depending on the fund objective) by addressing the inefficiencies inherent in the relevant fixed income index such as rigid index rules, and sizeable transaction costs. Each fund aims to use its techniques to avoid such index inefficiencies across its asset class, whether it is in investment grade corporate bonds, global high yield or fallen angels.

Common tools used to address these inefficiencies consist of credit portfolio trading to reduce transaction costs and improve liquidity; utilising market completion tools including credit derivatives and exchange traded funds to reduce turnover and manage the overall portfolio beta; and improving portfolio sampling through the application of Mellon’s time-tested, proprietary credit model.

The BNY Mellon Efficient Global IG Corporate Beta Fund and BNY Mellon Efficient US Fallen Angels Beta Fund aim to generate a return in excess of the relevant index, where the BNY Mellon Efficient Global High Yield Fund aims for index like returns.

The funds are available to European institutional and intermediary investors in Austria, Belgium, Denmark, Finland, France1 Germany, Italy, Luxembourg, Netherlands, Norway, Portugal (upon registration), Spain, Sweden, United Kingdom, Switzerland and Singapore (private placement only).

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