EI Sturdza launches emerging market fixed income fund

EI Sturdza investment Funds is pleased to announce the launch of the EI Sturdza Strategic Quality Emerging Bond Fund.

10 Jun 2016

EI Sturdza investment Funds is pleased to announce the launch of the EI Sturdza Strategic Quality Emerging Bond Fund.

The Fund’s investment objective is to achieve a total return through a combination of capital growth and income through investments in high quality emerging market bonds.

EI Sturdza believes that the launch of this additional fixed income product complements the company’s existing funds in this space, the Strategic Euro Bond Fund and Strategic Global Bond Fund. The three funds will all be advised by the same portfolio management team, led by portfolio manager Eric Vanraes, and will utilise the same investment style, based on managing primarily risk, liquidity and volatility. 

EI Sturdza has elected to launch the Fund in recognition of the following: 

  • Emerging market (EM) bonds (sovereign and corporates) offer diversification compared to traditional fixed income investments – opportunities in fast growing regions of the world, with attractive valuations and high expected returns. 
  • Emerging market bonds offer significant spread pick-up over the US market and their spread above US bonds is above its long term average. 
  • Emerging market economies and bond markets offer more investment opportunities when an Investment Adviser is able to manage higher volatility and different dynamics affecting the market (relative to traditional fixed income investment grade and developed markets), as well as political risk. 
  • Emerging market issuers often have lower leverage, more cash than their developed market peers; however with wider spreads. 
  • Many sovereigns have implemented reforms, creating opportunities for investors. 
  • Emerging market default rates are lower than in the High Yield space. 

To capitalise on the above and provide a compelling risk/reward profile to our client the Fund’s investments will be within hard currency bonds, denominated in USD, predominantly BBB+ to BB+ rated issuers in fast growing global regions – local currency debt will be excluded from consideration. The investment strategy will focus on enhancing yield, through active management, with a focus on global emerging markets, with as low as possible portfolio turnover. The strategy will be implemented within a benchmark agnostic, total return mind set, with risk management being a key component. It is anticipated that there will be a higher level of volatility associated with the investment strategy, when compared to the other funds managed by the portfolio management team as a result of the EM focus; however the investment portfolio should exhibit; lower risk, default risk and volatility compared to EM benchmarks and EM bond funds, particularly given that exposure will be concentrated towards high quality countries, sectors and issuers. 

It is the team’s focus on such high quality, liquid emerging market bonds that have led to the Fund being named the EI Sturdza Strategic Quality Emerging Bond Fund – there is a distinct difference between emerging and exotic issues

EI Sturdza’s fixed income range: 

  • Strategic Euro Bond Fund is a dynamic short term EUR denominated bond fund with an absolute return approach investing predominantly in high quality corporates, offering our clients a “cash enhanced” alternative to money market instruments for excess liquidities with an investment horizon above 9-12 months.
  • Strategic Global Bond Fund is an opportunistic medium term USD denominated bond fund with a total return approach investing in the global bond markets (sovereign, agencies, corporate bonds denominated in USD). 
  • Strategic Quality Emerging Bond Fund is a medium term emerging market USD denominated bond fund focusing on “quality emerging” bonds (sovereign, agencies and corporates) aiming to achieve a higher long term performance through the carry of emerging bond spreads.

Strategic Euro Bond Fund 

Duration Risk: Low
Credit Risk: Low
Benchmark: 3 Month Euribor

Strategic Global Bond Fund 

Duration Risk: Medium
Credit Risk: Medium
Benchmark: 3 Month USD Libor + 100

Strategic Quality Emerging Bond Fund 

Duration Risk: Medium
Credit Risk: High
Benchmark: 3 Month USD Libor + 200

Other developments: 

EI Sturdza takes this opportunity to advise our clients and prospectus that the benchmark against which we monitor the performance of the Strategic Global Bond Fund will be changing in the short term to be measured against the $3 month Libor + 100 bps. This adjustment is being made as we believe that this benchmark will more accurately reflect the total return approach being adopted by the portfolio management team. In addition, the benchmarks of the three funds, with an increasing spread above the risk-free index will reflect exactly the level of risk taken by each Fund. 

Should you wish to receive any additional information regarding the EI Sturdza Strategic Quality Emerging Bond Fund or EI Sturdza’s fixed income capabilities, including marketing presentations or statutory documentation, please do not hesitate to contact us directly.