US mutual fund group Massachusetts Financial Services has relaunched its range of international Luxembourg funds, renaming them as the MFS American Funds, to emphasise the focus on purely US investment opportunities.
Three new specialist funds have been added to the existing sub-funds: US Research, US High Yield and US Dollar Reserve funds.
Jeremy Beswick, managing director of MFS International in London, says. We have veered away from the more general and targeted specialist areas." The funds enable investors to look at the more "misunderstood areas of the US market".
The high yield bond fund invests in a portfolio of higher yielding and lower rated corporate bonds. Beswick thinks that European investors have shied away from this sector because of the 'junk bonds' stigma and that they could not be more wrong about this. "The attitude over here is that junk bonds are exactly that - junk not to be touched with a very long barge pole. The reality is somewhat different."
The junk bond market has gained notoriety in Europe following Michael Milken's fall from grace, but Beswick also puts it down to simple ignorance: "There's no such thing as a non-investment grade corporate bond market in Europe at all. So there isn't enough breadth or scope in the European marketplace for us to become expert in these things"
"You have to have your own internal research department and our fixed income researchdepartment ties in very neatly with the equity research department with our corp orate bond investments." he says. The US Research Fund utilises this capability - it invests in a portfolio of companies, selected by in-house investment analysts and may include "any listed company in the US equity markets, irrespective of market capitalisation".
"A fixed income researcher may be looking at a fixed income issue from company x whose offering a non-credit rated fixed income issuer at a very healthy premium," says Beswick, "but there's an analyst over there in the equity department whose already been looking at company x's equity offerings and will already have a database on that company."
The Charter Income Fund invests in US and foreign government bonds and high-yielding corporate bonds. The existing funds in the umbrella are: US Equity Fund, US Emerging Growth Fund, and Charter Income Fund
The MFS American fund offers four classes of share, incorporating a choice of front end or back-end loads with charges ranging from 0-6%. While the fund does not as yet offer an institutional class of share, the front end charge can be dropped right down to zero for institutional investors, says Beswick. The daily NAV calculations incorporate a 25 basis point fee which is charged every quarter which MFS will rebate.
The Luxembourg-based MFS International Funds have grown rapidly since their launch in 1992 and has over $220m invested. "Our largest European market to date has been Spain," says Beswick. The group has an established relationship with Banco Santander. In Germany, there are agreements with a number of banks. "Switzerland is an important market with the range of private banks there and the number of investment consultants." MFS believes that there are a increasing opportunities opening up in Scandinavia.