Aberdeen brings Asian bond funds to market

Taj MahalFund manager interest in Asian bonds has grown more visible this week as Aberdeen Asset Management says the region’s fixed income should be treated as a discrete market and launching two funds that invest there.

Aberdeen’s funds, one focusing on India and the other on the broader region, follow the announcement yesterday by Neuberger Berman of a hard currency Asia bond fund launch.

Asian bond fundamentals are improving but are also mispriced, says Aberdeen, and notes that Asian bonds are not highly represented in global indices.

The region has “solid” trade and current account balances that underpin its economies and the risk-return profile of corporate issuers is also attractive.

The two funds are the Aberdeen Global – Indian Bond Fund, which will invest in a portfolio of local currency corporate and quasi-sovereign bonds, and the Aberdeen Global – Asian Credit Fund, which is pan-regional and will invest in mainly investment grade bonds plus high yield hard currency issues. Aberdeen has seeded the funds.

Structural reforms in India and the credibility of leadership at the central bank are a “potent combination” supporting bonds there. The Indian rupee has held up well and inflation has been brought under control.
For the region at large, bonds offer decent real yields and uplift over benchmarks but with superior quality, says the firm.

Aberdeen says that although the Chinese have dominated the high yield market, investment grade issuance has boomed across markets as companies seek to tap low interest rates and diversify their sources of finance.

Victor Rodriguez, head of Asia Pacific fixed income at Aberdeen, says: “When there is so much anxiety globally about inflated asset prices, Asian debt would seem to offer good pricing and long-term diversification potential.”

The funds have initially been registered for sale in Austria, Belgium, Germany, Italy, Luxembourg, Netherlands, Spain and Switzerland. Both funds are priced in dollars but offer euro hedged share classes. The Indian Bond Fund does not hedge at the portfolio level, the currency being one element of total return.

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