NEW YORK, May 19, 2014 /CNW/ - First Investors has launched a new mutual fund—the First Investors Limited Duration High Quality Bond Fund. It is a short duration bond fund that seeks current income consistent with low volatility of principal, which may be beneficial in the current environment of rising interest rates.
"This Fund is an exciting new addition and enhances our overall product lineup," said Derek Burke, President of First Investors Management Company, Inc. (FIMCO).* "Our focus always is performance for our clients, to manage risk and to deliver returns for them over a complete market cycle. In a rising interest rate environment, this Fund provides our clients with a short duration investment option that we believe can help add current income to a portfolio."
"Bond funds with shorter durations are less impacted by rising interest rates," said Clark D. Wagner, Portfolio Manager and Director of Fixed Income, FIMCO. "This Fund is designed to generate current income while helping to manage risk. It will invest primarily in investment grade bonds and debt securities and maintain an average duration of between two and six years. The Fund is intended for investors who seek current income and are willing to accept a slightly lower yield to mitigate the impact of rising interest rates."
"At the same time, credit risk will be moderate because the bonds will be high quality," said Portfolio Manager Rodwell Chadehumbe. "The Fund will principally invest in different types of investment grade securities, including corporate bonds, securities issued or guaranteed by the U.S. Government or U.S. Government-sponsored enterprises, and mortgage-backed and other asset-backed securities."
The Fund's key advantages and benefits include:
- Current Income
- Interest Rate Management
- Deep, Experienced Portfolio Management Team
"This Fund should appeal to investors seeking less risk, since the assets will be high quality and shorter term so that as interest rates change, so will the Fund's value," explained Portfolio Manager Rajeev Sharma. "So it's geared toward investors who have a somewhat longer investing time horizon and are able to deal with modest market fluctuations. We believe our investment discipline, however, should prevent such fluctuations from creating major impacts on the Fund's value."
* FIMCO is the investment adviser to the First Investors family of funds and an affiliate of First Investors Corporation.
For more information about the First Investors Limited Duration High Quality Bond Fund, or any other First Investors mutual fund, you may obtain a free prospectus and summary prospectus by contacting your Representative, writing to the address below, calling (800) 423-4026 or visiting our website at www.firstinvestors.com. You should consider the investment objectives, risks, charges and expenses carefully before investing. The prospectus and summary prospectus contain this and other information and should be read carefully before you invest or send money. An investment in a mutual fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation ("FDIC") or any other government agency.
The principal risks of investing in the Limited Duration High Quality Bond Fund are:
Interest Rate Risk. In general, when interest rates rise, the market value of a debt security declines, and when interest rates decline, the market value of a debt security increases. The Fund may be subject to a greater risk of rising interest rates during periods of historically low interest rates. Securities with longer maturities are generally more sensitive to interest rate changes.
Credit Risk. This is the risk that an issuer of bonds and other debt securities will be unable to pay interest or principal when due. The prices of bonds and other debt securities are affected by the credit quality of the issuer and, in the case of mortgage-backed and asset-backed securities, the credit quality of the underlying loans. Credit risk also applies to securities issued by the U.S. Government and by U.S. Government-sponsored enterprises that are not backed by the full faith and credit of the U.S. Government. The securities issued by U.S. Government-sponsored enterprises are supported only by the credit of the issuing agency, instrumentality or corporation.
Prepayment and Extension Risk. The Fund is subject to prepayment and extension risk since it invests in mortgage-backed and other asset-backed securities. When interest rates decline, borrowers tend to refinance their loans. When this occurs, the loans that back these securities suffer a higher rate of prepayment. This could cause a decrease in the Fund's income and share price. Extension risk is the flip side of prepayment risk. When interest rates rise, the Fund's average maturity may lengthen due to a drop in prepayments. This will generally increase both the Fund's sensitivity to interest rates and its potential for price declines.
Derivatives Risk. Investments in U.S. Treasury futures and options on U.S. Treasury futures to hedge against changes in interest rates involve risks, such as potential losses if interest rates do not move as expected and the potential for greater losses than if these techniques had not been used. Investments in derivatives can increase the volatility of the Fund's share price and may expose the Fund to significant additional costs. Derivatives may be difficult to sell, unwind, or value.
Market Risk. The prices of, and the income generated by, the debt securities held by the Fund may decline in response to certain events, such as general economic and market conditions, regional or global economic instability, interest rate fluctuations, and those events directly involving the issuers. These events may lead to periods of volatility, which may be exacerbated by changes in bond market size and structure. In addition, adverse market events may lead to increased redemptions, which could cause the Fund to experience a loss when selling securities to meet redemption requests by shareholders. The risk of loss increases if the redemption requests are unusually large or frequent.
Security Selection Risk. Securities selected by the portfolio manager may perform differently than the overall market or may not meet the portfolio manager's expectations.
An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation ("FDIC") or any other government agency.
Foresters™ is the trade name and a trademark of The Independent Order of Foresters ("Foresters"), a fraternal benefit society, 789 Don Mills Road, Toronto, Canada M3C 1T9. Its subsidiary, First Investors Consolidated Corporation ("First Investors"), is licensed to use this mark. First Investors Corporation is a subsidiary of First Investors Consolidated Corporation. All securities products are offered through First Investors Corporation.
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SOURCE: First Investors Corporation
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