Investment case and philosophy
The emerging market (EM) fixed-income space remains an under-researched asset class that offers attractive alpha opportunities. Active management, based on thorough, fundamental country and credit research and a combination of top-down allocation and bottom-up selection, is, in our view, the best investment approach to uncover and take advantage of market inefficiencies. In addition, we pay particular attention to liquidity, diversification and risk management.
Within EM fixed income, we believe that EM corporate bonds remain an investment of choice and a good addition to a traditional global fixed-income portfolio, thanks to the following features:
- Access to the fastest-growing regions in the world
- Attractive valuations
- Strong risk-adjusted returns
- Limited correlation to other traditional fixed-income asset classes
For investors with a lower risk appetite or specific regulatory constraints, EM investment-grade corporate bonds are the best way to enter the asset class.
For investors with greater risk appetite, the overall EM corporate bond market offers the best return potential, provided the management process includes thorough issuer selection and diversification to help protect the portfolio against idiosyncratic risk.
The EM fixed-income team comprises eight highly experienced investment professionals, including in-house sovereign and corporate research analysts.
UBP’s Emerging Markets team has sizeable assets under management, totalling over USD 2.7 bn as at September 2016.
- Emerging Markets Manager of the Year – European Pensions Awards 2014
- Fixed Income Manager of the Year – Emerging Markets – Global ISF Investor’s Excellence Awards 2015
- UBAM FCP – EM Investment Grade Corporate Bond Fund: Winner of Asset View Awards 2016 – Emerging
- UBAM – Emerging Market Corporate Bond Fund -RC- USD: – I Migliori 300 Fondi – 2016 – Italy
There are three key elements to building and managing the portfolio:
1 - GLOBAL MARKET TRENDS
- Global business cycle
- Risk appetite
- G3 monetary policies
Portfolio's key metrics (e.g. duration, beta, etc.) & allocation
2 - FUNDAMENTAL COUNTRY ANALYSIS
- Quantitative and qualitative analysis (Country Scores)
- Dynamic and short-term outlook
Country target positioning
3 - FUNDAMENTAL CREDIT ANALYSIS AND RELATIVE VALUE
- Credit analysis: reviews of issuers, peer group
- Relative value analysis: comparison accross countries and sectors
Issuer and Bond Recommendation
► Portfolio Construction & Risk Monitoring
UBP’s Emerging Markets team offers a wide and innovative product range, including:
- Three EM corporate bond strategies:
2. Investment Grade and
3. High Yield Short Duration
- Total return and EM fixed-income multi-asset strategies
- Interest rate duration-hedged share classes
About two thirds of our assets under management are invested in emerging fixed income through bespoke mandates for institutional clients.
Despite the interesting potential that emerging markets have, investment in such markets entails a risk that is higher than in developed economies: it should only be considered by investors who have sufficient knowledge of financial markets and who are willing to take more risks.