Pioneer Investments launches Pioneer Diversified High Income Trust

By Jennifer Chiou

New York, May 25 - Pioneer Investments announced the introduction of the Pioneer Diversified High Income Trust which it says is the first U.S. closed-end fund to offer investors significant exposure to event-linked bonds, also known as catastrophe bonds or Cat bonds.

Cat bonds typically are issued by special-purpose entities created by insurers to spread the risk of losses from low frequency natural catastrophes such as hurricanes and earthquakes, according to a company news release.

The company added that the Pioneer Diversified High Income Trust invests in Cat bonds as part of a diversified portfolio that also includes floating-rate bank loans and global high-yield bonds.

The portfolio's initial asset allocation will include 37.5% in global high-yield bonds, 37.5% in floating-rate loans, and about 25% in event-linked bonds. The fund limits its investment in event-linked bonds to no more than 35% of the fund's portfolio.

The fund's primary investment objective is to seek a high level of current income with a secondary objective of capital appreciation.

Pioneer said that the fund issued 7.3 million shares at an initial price of $25.00 per share, resulting in gross assets of $182.5 million through an initial public offering managed by lead underwriter UBS Securities LLC.

In addition to the common share offering, the fund expects to use financial leverage up to approximately 33% of gross assets.

Based on the common shares issued, and assuming leverage at the anticipated levels, the fund's total assets would reach about $260 million. Shares in the fund began trading on the American Stock Exchange under "HNW."

"Our approach is to invest in a broadly diversified portfolio of high-yielding debt securities that are designed to help manage risk through investments in different asset classes that historically have had low correlations to each other and to most traditional asset classes," said Pioneer's director of U.S. fixed income Kenneth Taubes in a news release.

"The goal is to achieve a higher yield than traditional high-yield funds with lower volatility."

The fund is managed by members of Pioneer Investment's U.S.-based fixed-income team, along with Montpelier Capital Advisors, Ltd., which is also subadviser with respect to the event-linked bond allocation.

Andrew Feltus will manage the global high-yield portion of the fund. The floating-rate bank loan portion of the fund will be managed by Jonathan D. Sharkey, and Charles Melchreit will manage the fund's overall asset-allocation decision-making process.

Based in Boston, Pioneer Investments is the trade name for Pioneer Global Asset Management SpA, an investment firm, and its subsidiaries.

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