‘Pariahs’ embraced

Roxane McMeeken looks at Ashmore’s designs on Brazil, Mexico and Russia.

Emerging markets experts Ashmore Investment Management have launched a new debt fund focusing on Brazil, Mexico and Russia. Until recently, defaults in Russia and devaluations in Brazil and Mexico meant these countries were the pariahs of the bond world. Now, they are moving into the mainstream as emerging market debt performance across the globe is far outstripping that of equities. While the S&P 500 was 23 per cent down at the end of last year, emerging markets debt returned 14 per cent. In response to demand for greater access to this asset class from European banks, insurance companies and portfolio managers, Ashmore, which manages $4.2bn (E3.8bn) from its UK and US bases, has constructed its Ashmore Emerging Market Debt Fund. The Luxembourg-based Sicav is open-ended and is aimed at both individual investors and institutions. It has already captured E28m and is targeting annual returns of around 19 per cent. Record inflows Emerging market funds are attracting record flows, according to the global fund tracker Emerging-Portfolio.com Fund Research (EPFR). The US firm found that in the last week of February the 205 emerging market bond funds with $9bn in assets tracked by EPFR attracted net inflows of $157.9m, for a 1.8 per cent gain in total assets due to fresh money. “It was the biggest weekly inflow to the dedicated emerging market bond funds since we began tracking them on a weekly basis in 2001,” says Brad Durham, managing director of EPFR. And as fund investors know, a wall of money entering a particular asset class can have a significant effect on prices. Mirror success The new Ashmore fund mirrors the company’s successful existing Guernsey-registered product, currently holding assets worth $680m. This fund has produced 19 per cent a year since its launch in 1992. Commenting on the new fund, Mark Combes, managing director at Ashmore, says: “The investment process is exactly the same, largely unchanged for 10 years, and the same team, focussed around our investment committee, decides investment strategy for all our products.” Although the fund managers will concentrate on Brazil, Mexico and Russia, they will look at all emerging markets fixed income assets. The portfolio is expected to be spread across at least 32 countries. It will invest principally in G-7 currency (mainly US dollar) denominated debt instruments from sovereign issuers. It will steer clear of any leverage. Ashmore will run the fund according to its basic investment philosophy of aiming to seek value and target total return through active management. Jerome Booth, head of research at Ashmore, believes that emerging market debt’s time has come. “Emerging market debt is one of the few strongly performing asset classes in today’s global environment.”