Schroders has launched an actively managed Australian credit strategy designed to meet the needs of investors looking to diversify their equity or term deposits while preserving capital.

The fund manager explained that it would use Australia’s often elusive high-yield wholesale credit universe to make this happen.

Namely, the Schroder Australian High Yielding Credit Fund seeks to deliver returns of 2.5 per cent to 3 per cent above the cash rate over the medium term and offer daily liquidity unlike term deposits.

Although the fund has been operating since 2001. as an allocation within the firm's fixed income and multi-asset strategies, Schroders has confirmed it is now available to retail investors as a stand-alone product for the first time.

Helen Mason, who will manage the fund, said the strategy addresses the need for a higher income option outside of traditional equity and cash-based products, while seeking to avoid the liquidity challenges associated with private equity, structured and private debt markets.

"The intended outcome of this strategy is a diversified portfolio of investment-grade credit securities with the potential to provide consistent returns above cash and time deposits, but with lower volatility than equities," Mason said.

Schroders added that the fund could invest in the senior, subordinated, rated and unrated credit universe in Australia.

“After years of near-zero interest rates, yields have recovered and fixed income assets are back in action. Inflation has remained stable while growth and employment have held back, forcing central banks to keep rates high,” Mason said.

“The fund incorporates top-down and bottom-up views to identify the most compelling assets to own at any given point in the cycle and aims to provide attractive income opportunities, offering daily liquidity while effectively managing default risk.

"It has the flexibility to invest in the Australian credit universe, unfettered by benchmarks, to capture returns with appropriately managed risk."

According to Mason, the fund has returned 11.01% annually over the past year and 2.80% annually over the past five years.

Earlier this month, Schroders appointed Richard Oldfield as the group's new chief executive following the departure of Peter Harrison - effective November 8.

In April, it was announced that Harrison would be retiring after being appointed Group CEO in April 2016. He originally joined the fund manager in 2013. as global head of equities and later worked as global head of investments.