Barings unveils EM corporate debt fund

Baring Asset Management has launched the Emerging Markets Corporate Debt fund for manager Faisal Ali, aiming to maximise total returns for investors.

The fund will invest at least 70% of its assets at any time in emerging markets corporate debt securities, including investment grade and lower-rated paper.  It will also use a currency overlay.

The launch comes at a time of low yields in developed market debt and heightened equity market volatility.

‘Corporates have moved to take advantage of strong demand for higher yielding assets, and this favourable supply/demand picture has resulted in emerging corporate credit being one of the better performing areas of the fixed income universe in recent times,’ said Ali.

‘From a macroeconomic perspective, we recognise that ongoing events in Europe remain a cause for concern,’ Ali added. ‘We currently favour high quality, investment grade emerging market credits in this environment.’

Ali favours India’s domestic fundamentals and low export dependence, and debt issues in Brazil from companies in the consumer sector, which have exposure to the fast growing middle class.

The manager said the Middle East has been the best performing region over the last year, citing how the Dubai authorities, for example, have made great strides in tackling the debt overhang of domestic corporates.

As a result, Barings expects the Middle East risk premium over US treasuries to contract further over the rest of 2012.

Ali said: ‘Though the fund is denominated in US Dollars, we look for enhanced returns by using an innovative currency overlay, referencing the JP Morgan Emerging Markets Local Currency index to hedge the currency exposure back to EM local currencies. 

‘We believe most EM currencies should appreciate against developed market currencies over the long term.’

The minimum investment for the sterling retail share class is £2500 with an annual management fee of 1.25%.