Also, manager changes coming for many Van Kampen funds, and more.
Managed by Berkowitz, Fairholme Focused Income Fund will be a multisector fund that can invest in corporate bonds, government bonds, convertibles, and preferred shares. The idea of a focused portfolio of bonds is rather unusual, as most bond funds try to diversify away issue-specific risk for the benefit of conservative investors.
However, Berkowitz said he intends to keep the fund's duration on the low side. That would seem to place the fund's risk profile a bit in between a typical intermediate bond fund's risk profile and that of a multisector fund.
The fund will charge an expense ratio of 0.50%--half that of Fairholme Fund. However, that comes after a 0.50% waiver, which is set to expire after the fund's first year. The fund will start out very cheap for a multisector fund, but if it were to go to 1.00%, it would charge more than multisector king Dan Fuss at Loomis Sayles Bond
At the Morningstar Investment Conference in May, Berkowitz had expressed a growing interest in bonds. He tells us that the income fund idea grew out of work he's done managing liquidity at Fairholme Fund. Moreover, he's long researched the entire capital structure of companies in which he invests, so this fund will capitalize on that work. He says some bonds would be good for the new bond fund but are not a good fit for Fairholme. It's also possible that he could buy bonds in companies in which he already hit the ownership limits on the equity side.
In addition, he notes some longtime clients wanted something for shorter-term needs, though not as short as a money market.
Berkowitz points out that he got his start in investing with bonds in London in the early 1980s when bonds paid mammoth yields.
The fund comes with a minimum investment of $25,000. Berkowitz says that will help to keep expenses low. In addition, he doesn't want investors to use this fund as a money market substitute.