TRUST WATCH: Axiom European Financial Debt Fund

AXIOM EUROPEAN FINANCIAL DEBT: Aiming for 10% returns buying debt issued by banks to meet regulatory requirements

WHAT IS IT? Rather than investing in stocks, it buys debt and other instruments issued by banks to meet their regulatory requirements. It aims to provide investors with an annual return of around 10 per cent.

WHAT DOES IT INVEST IN? Fund manager Gildas Surry takes advantage of shifts in regulatory regimes, looking for financial instruments issued by banks and other institutions because they need to meet new regulations, and may be offering a better return because they need money. 

The biggest holdings include bonds issued by Dutch bank Van Lanschot, and UK lenders Shawbrook and Onesavings Bank.

WHAT DO THE EXPERTS LIKE? Haig Bathgate of Seven Investment says: ‘A yield in excess of 7 per cent is hard to ignore given the low rate environment.’ 

He adds that it is trading on a discount to the underlying value of its assets.

ANY DOWNSIDES? It isn’t the easiest for investors to understand. Bathgate says: ‘Investors should ensure that they choose managers who have a detailed understanding of the regulatory environment.’

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