The political and economic environment for emerging markets has been challenging over the past three years. However, we believe that investors have overestimated and mispriced the risk in emerging market corporate bonds.
To test this hypothesis, we undertook in-depth analysis of the 347* non-financial companies in the JP Morgan CEMBI Broad Index, representing the core emerging market corporate bond issuer investible universe.
Our research into the emerging market corporate debt asset class revealed a diverse, dynamic and evolving investment universe, filled with bonds issued by high quality national champions with proven resilience and strong global brands.
As such, we believe the asset class provides a unique investment opportunity for active investors with the ability to select companies and sectors that will benefit from current conditions especially as emerging market corporates usually offer a higher yield for lower leverage than their developed peers.
Good long-term performance
Since inception the Strategy has delivered attractive long-term risk-adjusted returns primarily through investment in a diversified portfolio of:
Annualised performance in USD
Past performance should not be taken as a guide to the future, losses may be made.. Performance is shown gross of fees in USD. Please refer to composite disclosure in the appendix. Source: Investec Asset Management, 30.0916, returns are based on the composite strategy. *Emerging Markets Corporate Debt inception date: 01.05.2011. **Comparison index: JPMorgan CEMBI Broad Diversified.
Investec Asset Management started in an emerging market and has been managing institutional emerging market mandates for more than 24 years.
We believe the best way to deliver alpha is by following three principles:
Our Emerging Market Corporate Debt Strategy is run by two established and experienced portfolio managers and is supported by a 42 strong team, with and average 12 years industry experience. Our specialist, experienced team manages assets of US$33.9 billion (as at 30.09.16).
*Note: The companies were predominantly selected as constituents of the JPM Morgan CEMBI Broad index, which is our primary index family. The companies are therefore part of our active coverage universe, and if not directly covered, are used to understand relative value and industry conditions. This group of companies makes up 90% of the index, excluding financials. Companies were excluded primarily because we were unable to obtain recent financial statements for private companies, or obtain financial statements that were directly relevant to the bonds in the index, or we believe the bonds don’t actively trade. Investec Asset Management’s sector leverage figures are not directly comparable to BoAML’s sector leverage figures due to different coverage universes and some calculations, such as the inclusion of restricted cash for certain companies. For full details of our research, please see our white paper “Evolving in adversity”, September 2016.
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