The Aegon Financial Credit Opportunities Fund will invest in capital securities from global banks and financial institutions. It will be managed by investment manager Alex Pelteshki and head of UK fixed income Iain Buckle, supported by four dedicated credit analysts.

The fund will invest in a concentrated portfolio of around 40-100 securities and is expected to have relatively low sensitivity to interest rate risk. At least 65% of the portfolio will be invested in Contingent Convertibles (CoCos).

The capital securities held in the portfolio include subordinated debt instruments, issued by financial institutions globally. Although relatively complex assets, these securities are typically issued by large, well-established institutions with strong investment grade ratings at issuer level.

The team will employ a proprietary investment strategy that emphasises a differentiated view of the asset class, with a focus on identifying overlooked opportunities that offer asymmetric return potential.

While capital securities often represent a smaller allocation within traditional bond funds, the team believes they warrant a dedicated fund allocation due to:

• The high-quality nature of issuers, which are subject to ongoing regulation and scrutiny
• Their potential to contribute to income and total return
• Their differentiated characteristics relative to other asset classes
• Their status as a stand-alone asset class that provides diversification, particularly relative to corporate credit
• Their relatively low sensitivity to interest rate movements

Iain Buckle said: “As we build on our fixed income expertise and offering, creating a dedicated strategy designed to provide investors with targeted exposure to financial credits, a rapidly evolving and increasingly important segment of the market, was a natural next step.”

Alex Pelteshki added: “With differentiated risk characteristics and income potential, capital securities can represent a compelling opportunity - particularly for investors focused on generating income, whatever the market environment.”