In the last two years, interest rates have risen sharply, to levels unseen in some time. Central banks have been compelled to act in an effort to curb inflation, exacerbated by the war in Ukraine and the sudden uptick in energy prices.
Higher interest rates represent a great opportunity for conservative investors, who have been ‘pushed’ in recent years to invest in higher-risk assets due to a lack of attractive alternatives.
Once rates reach current levels, will they continue to rise? How long will rates remain elevated? When will they start to decline? These are common questions …
The latest inflation data, easing strongly in Europe, indicates that we may have hit maximum levels and rates should begin to fall. While the precise moment of the first drop is difficult to predict, current forecasts suggest the first half of 2024.
Given this context, the launch of EDM Renta Fija Horizonte 5 años FI (five-year bond) offers an opportunity to secure attractive returns in the next five years.
The fund, which invests in (mainly European) bonds, has a time horizon of five years and a goal of maintaining the portfolio until maturity (buy and hold strategy). The expected return, which is not guaranteed, is between 4.25% and 4.5% annually (provided the investment is maintained until 30 November 2028).
Bond selection is performed by EDM’s Investment team, who rigorously analyses the various issuers. The fund’s portfolio consists of very strong, established companies with high credit ratings (average of BBB or investment grade). The fund is diversified by sector and does not invest in emerging market companies or in structured or derivative products. All assets are denominated in euros.
The fund complements EDM’s current range of funds. It is valued daily, with an investment time horizon of 30/11/2028, and semi-annual liquidity windows (June and December) starting in 2024.
Ricardo Vidal,
Chief Investment Officer
