An unconstrained actively managed emerging markets (EM) local currency debt solution. We seek to generate strong relative performance versus the J.P. Morgan Government Bond Index–Emerging Markets (GBI-EM) Global Diversified index the benchmark using an unconstrained approach aiming to identify the most attractive opportunities among all EM currencies and local rates.
Our investment philosophy is based on the principle that emerging markets debt (EMD) is a heterogeneous, semi-efficient market with multiple sources of mispricing. We believe in casting the widest possible net to seek to identify and profitably exploit opportunities, looking for them at every level of analysis – asset class, country, industry, issuer and security.
Unconstrained approach
- Portfolio holdings driven by output of team research and outlook, not benchmark weight.
Nimble approach
- Ability to be flexible and adapt the strategy to aim to take advantage of the full array of opportunities to the benefit of our clients.
An experienced, well-resourced EMD team
- Our dedicated EMD team comprises veteran investors with many years of experience managing the full spectrum of EMD.
The team follows a methodical process that starts with the assessment of the global macroeconomic environment, then proceeds to sovereign analysis which considers several indicators across currency and local rates.
The objective of the global macro analysis is to anticipate the general direction of global credit spreads, developed market rates and the US dollar by examining global macroeconomic trends.
Local currency sovereign analysis is conducted by the team of dedicated regional specialists. We consider several indicators across local rates and currency. Rate considerations include inflation, term premiums, foreign exchange (FX) hedged yields, and relative value versus US dollar-denominated bonds. Currency considerations combine long-term, mid-term, and short-term valuation factors.
The J.P. Morgan Government Bond Index–Emerging Markets (GBI-EM) Global Diversified tracks local currency government bonds issued by emerging markets, limiting the weights of the index countries by only including a specified portion of those countries’ eligible current face amounts of debt outstanding.
For more information about our Credit capabilities
Risks
Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt. This includes prepayment risk, the risk that the principal of a bond that is held by a portfolio will be prepaid prior to maturity at the time when interest rates are lower than what the bond was paying. A portfolio may then have to reinvest that money at a lower interest rate.
International investments entail risks including fluctuation in currency values, differences in accounting principles, or economic or political instability. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility, lower trading volume, and higher risk of market closures. In many emerging markets, there is substantially less publicly available information and the available information may be incomplete or misleading. Legal claims are generally more difficult to pursue.
Fluctuations in exchange rates between various foreign currencies may cause the value of the investment to decline. The market for some (or all) currencies may from time to time have low trading volume and become illiquid, which may prevent the Strategy from effecting positions or from promptly liquidating unfavourable positions in such markets, thus subjecting the investment to substantial losses.
IBOR risk is the risk that changes related to the use of the London interbank offered rate (LIBOR) or similar rates (such as EONIA) could have adverse impacts on financial instruments that reference these rates. The abandonment of these rates and transition to alternative rates could affect the value and liquidity of instruments that reference them and could affect investment strategy performance.
The disruptions caused by natural disasters, pandemics, or similar events could prevent the Strategy from executing advantageous investment decisions in a timely manner and could negatively impact the Strategy’s ability to achieve its investment objective and the value of the Strategy’s investments.
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