Generali Investments Luxembourg has launched an emerging debt fund with asset manager Aperture Investors and argues the strategy is set to benefit as interest rates normalise.
Aperture Investors Sicav, the name of the funds, is a value-oriented fixed income strategy investing in corporate, sovereign and quasi-sovereign debt securities of emerging markets.
The total return for emerging markets' external debt has proved to be profitable in recent times, said Generali, outperforming US Treasuries and US high-yield bonds over the last three decades. The asset managers attribute this to GDP growth in emerging markets and lower public debt ratios compared to developed countries, as well as improvements in credit quality.
The strategy aims to take advantage of an expected end of the rate-hike cycle and the normalisation of the US yield curve, which has shifted over the past 18 months. Going by past trends, the firm said, a peak in US dollar yields usually proves advantageous for emerging market returns.
Risk rating for the fund averages BB+, and Tim Rainsford, CEO of Generali Investments Partners, said the fund "will leverage on the historically low correlation of emerging markets debt with other asset classes, thus providing potential diversification benefits and attractive returns".
The fund is benchmarked against the JP Morgan Emerging Markets Bond Index Global Diversified and is registered in Austria, France, Germany, Italy and Spain.
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