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Ask The Experts: More Income And Diversification From Emerging Market Corporate Debt


Jim Cielinski, Head of Fixed Income at Threadneedle Investments shares his outlook for emerging market corporate debt as well as the investment decisions undertaken by the Threadneedle Emerging Market Corporate Bonds Fund.

Questions:
Can you tell us a bit more about the investment objective and strategy of the Threadneedle Emerging Markets Corporate Bonds Fund?
- Really focused on corporate bonds in emerging markets, which traditionally comprised of more sovereign issues
- With maturing capital markets, corporate issuances are increasing, with an estimated USD 200 billion in corporate bond issuances coming from emerging markets
- Emerging market corporate bonds tend to provide income advantages over the underlying sovereign issues and offer more scope for diversification within the fund
- Fund seeks to invest in good quality bonds available at very attractive spreads

Given the fund's rather narrow investment focus, should investors be prepared for a riskier ride with this fund?
- Fund's investible universe does contain slightly less liquid bonds, so fund may experience higher volatility during some parts of the investment cycle
- However, it is not considered a high volatility fund as it is designed to be diversified and relatively safe with a focus on investment-grade corporate bonds

Are there any investment ideas the fund is positive on right now?
- With slowing global growth, fund is focused on well-established companies in higher rated countries such as Petrobras and America Movil, a Mexican telecom operator
- Such companies are not so geared to the economic slowdown and are still able to offer attractive yields

On the other hand, are there any investment ideas the fund is less keen to pursue?
- Fund has favoured Asian and Latin America based companies, and also companies from developed economies which derive a large part of their revenues from emerging markets
- Fund is less positive on companies where the economic climate is highly uncertain and companies that have a lot of geographical concentration in their business lines
- Hence, Eastern European corporate bonds are still out of favour



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Broadcast Date 27 August 2012
Video Duration 00:04:55
Programme Ask The Experts: More Income And Diversification From Emerging Market Corporate Debt
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