Barings latest to launch into popular corporate EMD space

Barings has launched the Emerging Markets Corporate Debt Fund, which it announced in June, joining other global peers.

The new fund is the latest in a series of fund launches this summer in the emerging markets corporate debt space, which has enjoyed inflated demand and brought attractive returns this year.

AllianceBernstein is among the managers quick to capitalise on the popularity and yield potential of the asset class.

In September, the firm announced the launch of three new funds investing in the space. The trio – Emerging Market Corporate Debt, Asia Pacific Income Portfolio and Emerging Market Local Currency Debt – added to the firm’s existing $21bn EM debt portfolio.

The launch followed just days after Swiss asset manager Swiss & Global Asset Management unveiled its first dedicated corporate bond fund investing in emerging markets.

The new Barings fund aims to maximise total return, consisting of income, capital appreciation and through the use of a currency overlay, by investing in emerging markets corporate debt securities.

Fund manager Faisal Ali said: “In an environment of low yields and heightened equity market volatility, an increasing number of investors are becoming attracted to the robust fundamentals and income-generating potential of emerging markets corporate debt.

“Emerging corporate credit has been one of the better performing areas of the fixed income universe in recent times. We currently favour high quality, investment grade emerging market credits.”

The manager likes India’s domestic dynamics and low export dependence, as well as debt issued by companies in the consumer sector in Brazil, as these companies tend to enjoy direct exposure to a fast-growing middle class and rising real wages.

Barings notes the best performing region over the last year has been the Middle East, where it expects risk premium over US treasuries to contract further over the rest of the year.

Ali continues: “Though the [new] fund is denominated in US dollars, we look for enhanced returns by using an innovative currency overlay. We believe most EM currencies should appreciate against developed market currencies over the long term.”

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