The new fund will aim to maximise total return, consisting of income, capital appreciation and through the use of a currency overlay, by investing in emerging market corporate debt securities. The Fund will invest at least 70% of its total assets at any time in emerging market debt securities across a range of emerging markets and can invest in both investment grade and non investment grade debt instruments.
The fund will be run by Faisal Ali, who joined Barings in August 2011 and has over 8 years of fixed income investment experience across Asia and emerging markets.
Faisal Ali comments:
"We believe emerging market corporate debt has the potential to offer attractive risk-adjusted returns over the medium and long-term. This asset class has shown impressive growth over the past decade and today can rightly be considered as an asset class within its own right. The rise in issuance over the last two years, as many local corporates take advantage of the current climate of low yields and a relatively weak US dollar, has not gone unnoticed by foreign investors.
"As the economies of emerging markets continue to develop and mature, supported by favourable demographic and secular trends, high productivity rates and comparatively superior growth rates, we think the local corporate bond market should continue to expand to help finance and fund a growing consumer base.
"Though the Fund will be denominated in US Dollars, we will seek 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."
Barings has a strong history and presence in emerging markets with US$16.7bn1 in assets invested in these markets across equities, fixed income and multi asset products (as at 30 April 2012).
The Baring Emerging Markets Corporate Debt Fund will be a sub-fund of the Baring Investment Funds plc, an Irish domiciled open-ended umbrella investment company with variable capital. Baring Investment Funds plc is authorised by the Central Bank of Ireland as an Undertaking for Collective Investment in Transferable Securities. The launch date is subject to regulatory approval.
