Neuberger Berman unveils Asian debt fund

Neuberger Berman has boosted its emerging markets debt (EMD) offering with the launch of an Asian focused fixed income Ucits fund for non US investors.

The Asian Debt Hard Currency fund can invest in government and related debt, as well as in corporate bonds, as well as across the investment grade and high yield spectrum.

The EMD team at Neuberger Berman has a long established track record in investing, with more than two decades investing in hard currency EMD, 17 years in local currency FX and rates, as well as 12 years in emerging corporate bonds.

Prashant Singh, Senior Portfolio Manager (Asia) in Neuberger Berman’s EMD team, comments: “Asia is the deepest and most liquid of the emerging debt capital markets, partly as a result of the concerted efforts of the authorities to bolster themselves against a repeat of the financial crises of the late 1990s.

“Trading volumes and bid-ask spreads on government bonds have improved consistently over the last decade, and are in some cases even better than in some developed markets, adjusted for market capitalisation.

“Thirty-year government issues are now common for the region. Thailand offered a 50-year bond in 2011, and inflation-linked bonds, bond futures, and interest rate derivatives are also now well-established.”

This deepening of government bond markets and the lengthening of sovereign curves has also set the foundation for the development of the corporate bond universe.

“Since 2008, growth of corporate bond markets has outpaced that of government bonds by nearly three times, and we anticipate local-currency corporates to be the fastest-growing sector in emerging Asia debt for the foreseeable future,” Singh adds. “Corporates already account for two-thirds of Asia’s hard-currency market, with China’s state-owned enterprises leading the way.”

Despite recent investor scepticism towards China, Singh anticipates the rapid pace of opening up of China onshore markets to be sustained. The next steps are likely to include further compression of quota and interbank access approval times, as well as establishment of more RQFII centres and homogenization of QFII and RQFII regulations.

“These reforms are occurring alongside deposit and exchange rate liberalisation, a gradual opening of balance-of-payment accounts, and more free trade zones, as China navigates the transition from a centrally-planned, export-driven economy to one that is more market-determined and balanced,” Singh adds.

“This will provide investors with deeper, more liquid capital markets in the region. Just as important, the early stage of China’s reforms and the remaining levers its authorities still have to pull to liberalise capital markets and achieve further productivity convergence with neighbours such as Taiwan and Korea indicates the huge potential of this economy, which already represents almost 60% of emerging Asia’s GDP.”

The Neuberger Berman Asian Debt – Hard Currency fund is co-managed by Prashant Singh, Nish Popat and Jennifer Gorgoll. It is a sub-fund of the Irish-Domiciled Ucits fund umbrella, Neuberger Berman Investment Funds plc. It is registered for sale in the UK and across Europe and Asia.

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