- Superior long-term track record with 4th consecutive year of Recommended Fund nomination
- Strong risk management capabilities despite market volatility
- 5% per annum monthly cash payout feature
- Suitable for investors seeking stronger returns in the fixed income space, or keen to gain emerging market debt exposure
The United Emerging Markets Bond Fund (previously known as United GEMs Investments (S$)) has a rather broad investment mandate, with the liberty to invest in both sovereign and corporate-issued debt instruments within emerging markets. Emerging markets is also defined rather broadly by the fund as developing economies, and which include many of the countries in Asia, Latin America, Europe, Africa and the Middle East.
+ Strong Long-Term Performance with Limited Downside Fluctuations
The United Emerging Markets Bond Fund was launched and has been available to investors via the Fundsupermart platform since August 2001. Since then, it has delivered strong returns; over ten years, the fund has delivered 6.7% on an annualised basis. More recently, the fund’s annualised return over the last five years was 6.8%.
Chart 1: Performance of United Emerging Markets Bond Fund Over Last 5 Years
While the fund’s investment universe lies in the higher risk segment of fixed income, the fund manager has proven capable in managing the risks associated with these securities. Even during the aftermath of the Great Financial Crisis where risk-aversion behaviour ruled the day, the fund only posted a loss of 5.2% in 2008. Since then, it has gone on to deliver positive year-on-year returns (see Table 1).
|Table 1: Year-on-year returns of Fund
|Source: iFAST compilations, returns in SGD terms, dividends reinvested, data as of 25 July 2012
The fund was able to mitigate losses during the volatile period of 2008 due to the manager’s strong conviction and bold allocation into cash during the last quarter of 2008. For these three months, the fund held more than half of its portfolio in cash; specifically, it had 76.70%, 56.78% and 52.46% allocated in cash over October, November and December 2008 respectively.
+ Managed in SGD-perspective
While the fund is not restricted to debt securities denominated in certain currencies, it is managed from a SGD-perspective, meaning the fund manager will seek to maximise returns from the fund’s investments in SGD terms. To this end, the fund manager will manage the portfolio’s currency exposure by hedging its currency positions and prevent currency movements from eroding returns in SGD terms. Hence, local investors need not be overly concerned over the fund’s currency exposure and its impact on returns.
+ 5% Per Annum Monthly Payout
Investors who are fond of receiving dividends from their investments will be glad to know that the United Emerging Markets Bond Fund has a monthly payout feature. The fund manager has guided for a 5% per annum pay out, which translates to approximately $0.0059 of dividends per unit owned in the fund. For an investment of $10,000 at the current NAV of $1.449 as of 25 July 2012, this would suggest a monthly cash dividend of $40.71.
Based on the fund’s strong performance record, the target of a 5% per annum payout is a reasonable one as the fund has been able to achieve returns greater than 5%. In addition, the fund’s latest yield-to-maturity was 6.23% (as of end June 2012) further highlighting the fund’s ability to pay out dividends from its income generating investments rather than capital.
A WISE Investment
The United Emerging Markets Bond Fund will be suitable for investors who are comfortable investing in the riskier segment of the bond market, and are willing to stomach some volatility for significantly higher yields. However, interested investors can take comfort in the manager’s ability to navigate the fund through volatile times, as demonstrated by the fund’s mere 5.2% decline in 2008.
Given the fund’s 4th consecutive recommendation in the Bonds – Global Emerging Markets category and its strong performance record, investors who are looking for emerging market debt exposure will do well with the United Emerging Markets Bond Fund.
With the fund’s participation in the WISE@fundsupermart.com programme, investors will be able to participate in the fund’s steady growth at 0% sales charge. In conjunction with the launch of WISE, investors with at least SGD 100,000 worth of investments in any of the WISE fixed income funds will automatically participate in our exciting lucky draw. In addition, investors who need any advice with regards to the United Emerging Markets Bond Fund or their portfolios may read more about the fund in its Fund Review or contact our friendly Client Investment Specialist team at email@example.com.
A Beginner's Guide to Fixed Income Investing