Download Navigating 5 years of emerging market corporate debt

For professional investors and financial advisers - not for use by retail investors
Navigating 5 years of emerging
market corporate debt
Aberdeen Global – Emerging Markets Corporate Bond Fund
November 2016
A mainstream asset class
Here we discuss some of the reasons why emerging markets (EM) corporates have become an important diversifier for your fixed income portfolio.
1
Relative size of markets (US$bn)
EM corporates are a
diverse asset class
Among major fixed income asset classes,
EM corporates have been expanding at a rapid
pace since 2009 when compared to other fixed
income markets. With size comes diversification,
both geographically and sectorally.
2000
1500
1000
500
0
EM
US
US
EM hard
Corporates High Yield Leveraged currency
Loans Sovereigns
ABS
CMBS
Euro
High Yield
Source: JP Morgan, 31 October 2016. For illustrative purposes only.
2
EM Corporate Leverage & Liquidity
Strong credit
fundamentals
Average credit metrics in EM corporates are
stronger than their US high yield counterparts.
8
7
6
5
4
3
2
1
0
Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15
Global EM HY Net Leverage (x)
US HY Net Leverage (x)
Source: BofA Merrill Lynch Global Research, December 2015.
3
Default rates
%
14
Low default rates
Despite the perception of higher risk in EM,
default rates in the EM corporate universe are
lower than developed markets.
12
10
8
6
4
US high yield
EM avg
2
Navigating 5 years in emerging market corporate debt
2013
2014
2011
2012
2010
2009
2008
2007
2006
2005
2004
2002
2003
2001
2000
EM
Source: JP Morgan, August 2016. For illustrative purposes only.
2015
2016
YTD
2016F
2
0
US high yield avg
4
10 year annualised volatility
Performance
Over the past 10 years the JP Morgan Corporate
Emerging Market Bond Index has delivered a
cumulative return of 108.25% and an annualised
return of 6.40%. This compares favourably to
other global bond indices.
%
16
14
12
10
8
6
4
2
0
GBI-EM CEMBI
Global Div Broad
(in USD)
Div
JULI
EMU IG
Maggie
US
NEXGEM Euro HY
Treasury
Source: JP Morgan, November 2016. For illustrative purposes only.
Indices used: Euro Credit = Maggie, US Treasury = GBI US, US IG Corporates = JULI, Eurozone IG =
EMU IG, EM Corporates = CEMBI BD, EM LC Sovereign = GBI-EM GD, EM Frontier = NEXGEM.
Past performance is not a guide to future results.
Cumulative performance
%
160
150
140
6.54% annualised returns since launchA
130
120
110
100
Sep
11
TM
1st quartile for 1, 3 and 5 year performance
amongst emerging market corporate bond fundsB,c
Mar Sep
12
12
Fund
Mar Sep Mar
13
13
14
Benchmark
Sep
14
Mar
15
Sep
15
Mar
16
Sep
16
The Fund = Aberdeen Global – Emerging Markets Corporate Bond Fund.
The Benchmark = JPM Corporate Emerging Markets Bond Index, Broad Diversified Index.
Source: Aberdeen Asset Managers, BPSS, Datastream, USD, September 2016.
Performance is shown gross of fees and does not reflect investment management fees.
Had such fees been deducted, returns would have been lower.
The benchmark is included for comparison purposes only as the fund is not managed to a
specific benchmark.
Past performance is not a guide to future results.
Annual returns (%) - year ended 30/10
Fund
2016
2015
2014
2013
2012
10.29
(2.58)
6.15
(0.08)
13.87
Performance Data: Share Class A2 Acc.
Source: Lipper. Basis: Total return, NAV to NAV, net of annual charges, gross income reinvested.
This fund is not managed against a specific benchmark.
Past performance is not a guide to future results.
Based on gross returns since inception (December 2010), source: Lipper, August 2016. Figure is to end of August 2016 for share class ZI Inc, USD.
Source: Lipper, August 2016. Basis: Total Return, NAV to NAV, net of annual charges, gross income reinvested, USD.
C
© 2016 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not
warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no
guarantee of future results.
A
B
Navigating 5 years in emerging market corporate debt
3
Navigating the market
The Aberdeen Global – Emerging Markets Corporate Bond Fund is celebrating 5 years of strong performance. We rely on two key factors:
People
The emerging market (EM) corporate debt
universe has diversified exponentially in
geography and sector over the past 5 years.
To keep up with the expanding size of the
asset class we have:
London
Budapest
Hong Kong
• 15 dedicated EM corporate debt
professionals in London, Singapore,
Kuala Lumpur and Thailand; and
Singapore
Jakarta
• More than 80 dedicated emerging
market professionals around the world.
Bangkok
Kuala Lumpur
São Paulo
Sydney
Process
Credit selection is key. Our fundamental analysis uncovers companies that can weather political and macroeconomic headwinds through the cycle.
We research around 1,000 companies in over 70 countries including:
• Global leaders in their respective fields
$91.2 bn
$34.8 bn
$27.9 bn
$4.9 bn
Hutchison Whampoa, a Fortune
500 telecom and ports operator
CNOOC Ltd, China’s
largest producer of
offshore oil and gasD
Grupo Globo, the largest
media company in
Latin AmericaE
$1.2 bn
$1.1 bn
$605
mm
$596
mm
GT Bank, one of the
largest banks in Nigeria
MHP, the market leader in the
Ukrainian poultry market
Cementos Progreso, owns
83% of the cement
market in GuatemalaF
Banglalink, the second
largest telecom company
in BangladeshG
Gazprom, the world’s
largest gas reserveC
• National champions
Figures are revenues for financial year 2015 in US dollars.
Source: Gazprom webiste, April 2016.
Source: CNOOC Ltd website, April 2016.
E
Source: Grupo Globo website, January 2016.
F
Source: FitchRatings, September 2015.
G
Source: EMC, April 2016.
C
D
4
Navigating 5 years in emerging market corporate debt
Research trips
We undertake on-the-ground proprietary research to assess the underlying creditworthiness of the companies in which we invest. We always meet
the management of the companies we invest in and keep in regular contact, which helps us build good long term relationships and gives us access
to the company even in times of stress. Meeting management and making site visits also gives us a better idea of the drivers of the business and
helps us understand their corporate culture. Some of the research trips we have done recently include the below destinations.
Turkey – Istanbul
Russia – Moscow
Brazil – Rio de Janeiro
India – Delhi
Nigeria – Lagos
Peru – Lima
Chile – Santiago
Bangladesh – Dhaka
Indonesia – Jakarta
Thailand – Bangkok
Hungary – Budapest
Malaysia – Kuala Lumpur
China – Shanghai
China – Shenzhen
Azerbaijan - Baku
Argentina – Buenos Aires
Navigating 5 years in emerging market corporate debt
5
Important information
For professional investors and financial advisers - not for use by retail investors
Please consider the risks
• The value of shares and the income from them can go down as well as up and your clients may get back less than the amount invested.
• Investing globally can bring additional returns and diversify risk. However, currency exchange rate fluctuations may have a positive or negative impact on the value of
your investment.
• Bonds are affected by changes in interest rates, inflation and any decline in creditworthiness of the bond issuer. Bonds that produce a higher level of income usually also
carry greater risk as such bond issuers may not be able to pay the bond income as promised or could fail to repay the capital amount used to purchase the bond.
• Emerging markets or less developed countries may face more political, economic or structural challenges than developed countries. This may mean your money is at
greater risk.
• This Fund can use derivatives in order to meet its investment objectives. This may result in gains or losses that are greater than the original amount invested.
• A full list of risks applicable to this Fund can be found in the Prospectus, which is available on request or at our website aberdeen-asset.com.
Contact us
For more information please visit aberdeen-asset.com
Other important information
Aberdeen Global is a Luxembourg-domiciled UCITS fund, incorporated as a Société Anonyme and organized as a Société d’Invetissement á Capital Variable (a “SICAV”).
The information contained in this marketing document is intended to be of general interest only and should not be considered as an offer, or solicitation, to deal in the shares
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No information, opinions or data in this document constitute investment, legal, tax or other advice and are not to be relied upon in making an investment or other decision.
Subscriptions for shares in the Fund may only be made on the basis of the latest Prospectus and relevant Key Investor Information Document (KIID). These can be obtained
free of charge from Aberdeen Asset Managers Limited, 10 Queen’s Terrace, Aberdeen, AB10 1YG, Scotland and are also available on aberdeen-asset.com.
Issued by Aberdeen Asset Managers Limited. Registered in Scotland No.108419. Registered Office: 10 Queen’s Terrace, Aberdeen, AB10 1YG. Authorised and regulated by the
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at any time, without notice.
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