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
May 2016
A main stream asset class
Here we discuss some of the reasons why EM corporates have become a key diversifier for your fixed income portfolio.
1
Relative size of markets (US$bn)
2000
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.
1500
1000
500
0
EM
US
US Leveraged EM hard
Corporates High Yield
Loans
currency
Sovereigns
Asset- Commercial
backed
mortgagesecurities
backed
securities
Source: JP Morgan, 31 December 2015. For illustrative purposes only
2
EM Corporate Leverage & Liquidity
6
Strong credit
fundamentals
Average credit metrics in EM corporates are
stronger than their US high yield counterparts.
5
4
3
2
Jun 12
Jun 13
Jun 14
Jun 15
2016F
Jun 07 Jun 08 Jun 09 Jun 10 Jun 11
Global EM HY Net Leverage (x)
US HY Net Leverage (x)
2014
0
2012
1
Source: BofA Merrill Lynch Global Research, June 2015.
%
15
12
EM
US high yield
EM avg
2015
2013
2011
2010
2009
2008
2007
2005
2006
2004
2002
3
0
2003
Despite the perception of higher risk in EM,
default rates in the EM corporate universe are
lower than developed markets.
9
6
2001
Low default rates
2000
3
Default rates
US high yield avg
Source: JP Morgan, 31 December 2015.
4
YTM vs. 10 year annualised volatility
%
10
Performance
Over the past 5 years the JP Morgan Corporate
Emerging Market Bond Index has delivered a
cumulative return of 24.4% and an annualised
return of 4.46%. This compares favourably to
other global bond indices.
US HY (B)
8
EM Corporates (BBB)
6
US IG Corporates (A)
4
US Treasury (AA+)
Euro Credit (A+)
2
0
3
6
9
10 year annualised volatility
Navigating 5 years in emerging market corporate debt
Eurozone IG (A+)
12
15
Source: JP Morgan, 31 December 2015. For illustrative purposes only.
JP Morgan benchmarks 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.
Ratings: average S&P rating as at month end December 2015.
Past performance is not a guide to future results.
2
Frontier (B+)
EM LC Sovereign (BBB+)
Cumulative performance
%
135
130
125
5.44% annualised returns since launchA
120
115
110
105
100
95
1st quartile for 1, 3 and 5 year performance
amongst emerging market corporate bond fundsB
90
Mar
11
Sep
11
Fund
Mar
12
Sep
12
Mar
13
Sep
13
Mar
14
Sep
14
Mar
15
Sep
15
Mar
16
Benchmark
The Fund = Aberdeen Global – Emerging Markets Corporate Bond Fund.
The Benchmark = JPM Corporate Emerging Markets Bond Index, Broad Diversified Index.
Source: Aberdeen Asset Management, April 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.
Calendar performance (%)
Fund
2016
2015
2014
2013
2012
3.30
0.80
2.35
(2.05)
19.12
Performance Data: Share Class I2 Acc
Source: Lipper. Basis: Total return, NAV to NAV, net of annual charges, gross income reinvested.
Benchmark is for comparison purpose only. This fund is not managed against a specific benchmark.
Past performance is not a guide to future results.
A
B
Based on gross returns Launch: April, 2011. Source: Lipper. Figure is to end of March 2016.
Based on Morningstar category of Emerging Market Corporate Bond Funds for the purpose of performance measurement.
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
Gazprom, the world’s
largest gas reserveC
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 companyin
Latin AmericaE
• National champions
$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
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.
Contact us
For more information please visit aberdeen-asset.ch
Other important information
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