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(*)
DPAM L Bonds Emerging Markets Sustainable - F
Institutional Factsheet | 30 June 2017
Morningstar
(*)
MANAGER COMMENT
Market comment
Emerging market (EM) debt finished the second quarter of the year seeking
a second wind amidst a less dovish tone from the central banks of
developed economies, falling oil prices, mounting political turbulence out
of a couple of key emerging countries and, maybe, a lack of inspiration
ahead of the summer lull.
Mounting political noise includes the controversies around presidents
Michel Temer in Brazil and Jacob Zuma in South Africa. An eviction of
Temer would be bad news for Brazilian assets, while the main element of
support in South African markets is the hope to see Zuma dismissed. We
therefore stay cautious on both markets but are not overly concerned, as
there is no reason to believe they would necessarily be replaced by antireform contenders.
Energy prices have been falling each and every month of this first semester
without damage to EM assets, but the old correlation between oil and EM
currencies (FX) was revived on the back of higher supply (out of Libya,
Nigeria and US shale producers), stubbornly high US inventories and the
outbreak of a dispute between Qatar and its Gulf Cooperating Council
neighbors. Interestingly and reassuringly, metal and agriculture
commodities failed to follow on that same path.
The Fed, Bank of England and the ECB surprised the core rate markets by
conveying a somewhat hawkish message about monetary policy
normalization. We do not expect the move to escalate in a disorderly way,
but will keep a wary eye on what is one of the main factors determining the
level of the risk premium in risky assets.
On the bright side, China is staying off the bears’ radar, with economic data
surprising to the upside, the inclusion of China A-share equities into the
MSCI benchmark EM Index and the launch of the so-called Bond Connect, a
Hong-Kong-based bond-trading platform facilitating access to the Chinese
on-shore debt market for international investors.
Looking at global EM debt indices, gains were skewed towards local rates
again, while credit and EM FX (against EUR) were weak:
●
●
EM local government debt was down 0.91% in unhedged EUR terms,
while the EUR-hedged equivalent gained 0.26%, as measured by
Bloomberg Barclays EM Local Currency Government, 10% countrycapped, indices (Bloomberg tickers: EML1TREU and EML1TREH).
EM sovereign credit in hard currency fell 1.41% in unhedged EUR terms,
as measured by the Bloomberg Barclays EM Hard Currency Aggregate
Sovereign Index (Bloomberg ticker: LG20TREU).
From a regional perspective and in EUR terms, the best performer in the
local currency space was, by a landslide, Mexico. At the other end of the
spectrum, Brazil, Korea, Colombia and Russia delivered the worst returns.
Rating changes (Foreign Currency Long-Term Debt):
●
●
Downgrades: South Africa from Baa2 to Baa3 (Moody’s), Qatar from AA
to AA- (S&P’s), Ecuador from B to B- (S&P’s).
Upgrades: none.
Main central bank actions (Key policy rate):
●
●
Rate cuts: Colombia by 50 basis points (bp) to 5.75%, Russia by 25 bp to
9.00%, Belarus by 100 bp to 12.00%, Kazakhstan by 50 bp to 10.50%,
Mongolia by 200 bp to 12.00%, Uganda by 100 bp to 10.00%, Rwanda by
25 bp to 6.00%.
Rate hikes: Mexico by 25 bp to 7.00%, Hong Kong by 25 bp to 1.50%,
Saudi Arabia by 25 bp to 1.25%, UAE by 25 bp to 2.00%, Qatar by 25 bp
to 1.50%, Bahrain by 25 bp to 1.50%, Jordan by 25 bp to 3.75%.
Performance
The Net Asset Value of the F share class lost 0.44% in June and is up 3.77%
year-to-date.
Last month’s performance topped our reference sample of local currency
peers and indices again. This time, the main positive drivers of
outperformance came from our positioning in Mexico, Korea and Brazil as
well as by the absence of Russia from our portfolio. Core rate duration
management was a positive contributor too. The only drag on performance
was the exposure to the Argentinian and Colombian pesos and the USD.
Last month’s strategy
In Central Europe, we increased Poland and Czech Republic at the expense
of Romania and Croatia. In Africa, we increased Mozambique, Ivory Coast
and Senegal and extended duration in South Africa.
In Latin America, we increased Argentina, Colombia, Chile and Uruguay. In
Asia, we increased exposure to the Indian rupee.
Outlook & strategy going forward
The major convergence trade between emerging and developed market
rates remains the underlying driving force. Even after more than a year of
rally, valuations in local currency debt are still attractive on a medium-term
horizon.
On a shorter-term horizon, we are becoming more cautious due to higher
core interest rates and as cross-asset volatilities seem to be bottoming out.
In this context, our intention is to continue to actively manage duration
amidst the core rate normalization, to reduce FX exposure to liquidity
currencies and to optimize risk contribution through deeper diversification
and granularity across select frontier markets.
(*) Morningstar Rating Overall
Thierry Larose is AAA-rated by Citywire for his rolling 3-year risk-adjusted performance, for the period ending March 2016.
Source and Copyright: Citywire.
DPAM is signatory of the United Nations Principles for Responsible Investment (UN PRI).
Please read the important information at the end of this document.
1
DPAM L Bonds Emerging Markets Sustainable - F
Institutional Factsheet | 30 June 2017
INVESTMENT UNIVERSE
OVERVIEW
Asset Class
Bonds
Category
Emerging Markets
Strategy
Active Strategy
Fund Of
DPAM L
Legal Structure
SICAV
Domicile
Luxembourg
Reference Currency
EUR
Liquidity
Daily
Sub-fund launch
18.03.2013
First NAV date
18.03.2013
Countries notified for public sale
AT, CH, DE, ES, FI, FR, GB, IT, LU, NL
ISIN
LU0907928062
Entry Fee
Maximum 1%
Exit Fee
0.00%
Management Fee
0.40%
TER (31.12.2016)
0.74%
Minimum investment
EUR 25'000
NAV
(Capitalisation)
125.62
Assets (all classes)
mn EUR 742.17
Number of positions
74
-0.44
3.77
8.17
8.08
-
PORTFOLIO CHARACTERISTICS
Maturity (Years)
Duration (Years)
Modified Duration (%)
Yield to Worst (%)
YTW (ModDur Weighted) (%)
Number of Issuers
BREAKDOWNS (%)
Countries
Mexico
Poland
Brazil
Czech Republic
Colombia
Indonesia
Supranational
South Africa
Peru
Chile
Other
Cash
Currencies after hedging
9.8
9.2
8.9
6.2
5.5
5.2
4.8
4.7
4.2
4.1
32.4
4.9
Credit Ratings (Scale S&P)
PERFORMANCES (%)
1 month
YTD
1 year
3 years annualised
5 years annualised
10 years annualised
The fund principally invests in bonds and/or other debt securities, including but not limited to,
perpetual bonds, inflation-linked bonds, zero coupon bonds and structured products, such as for
example, credit linked notes, with a fixed or floating rate, denominated in any currency, issued (or
guaranteed) by emerging countries, including its regional public authorities and public (or
equivalent) bodies or by international public bodies, such as World Bank or the European Bank for
Reconstruction and Development and selected on the basis of sustainable development criteria,
such as, for example, social equity, environmental awareness and socially equitable political and
economic governance.
9.81
6.06
5.73
5.77
5.70
31
AAA
AA
A
BBB
BB
B
C-Category
Not Rated
Cash
DPAM is signatory of the United Nations Principles for Responsible Investment (UN PRI).
Please read the important information at the end of this document.
US Dollar
Polish zloty
Mexican peso
Euro
Brazilian real
Czech koruna
Colombian peso
Indonesian rupiah
Indian rupee
Peruvian sol
Other
9.7
9.2
9.0
8.9
6.2
6.2
5.5
5.2
4.8
4.2
31.1
Modified Durations
4.8
10.3
22.4
31.7
11.8
12.2
0.7
1.2
4.9
< 3%
3 - 5%
5 - 7%
7 - 10%
10 - 15%
> 15%
Cash
15.1
13.3
27.1
27.2
9.5
2.8
4.9
2
DPAM L Bonds Emerging Markets Sustainable - F
Institutional Factsheet | 30 June 2017
Reference Currency EUR | Since Inception (18.03.2013)
Fund
DISTRIBUTION OF MONTHLY RETURNS
CUMULATIVE PERFORMANCE
130%
125%
10
120%
8
115%
6
110%
105%
4
100%
2
95%
90%
0
-5 -4 -3 -2 -1
0
1
2
3
4
5
STATISTICS
Volatility
Sharpe Ratio
Downside Deviation
Sortino Ratio
Positive Months
Maximum Drawdown
2013
%
2014
2015
2016
2017
12-MONTH ROLLING RETURNS
%
8.51
0.65
4.95
1.11
59.62
-12.45
%
%
%
Risk-Free Rate -0.08%
20%
10%
0%
-10%
2013
2014
2015
2016
2017
2015
2016
2017
MONTHLY RETURNS
5%
0%
-5%
2013
2014
MONTHLY RETURNS IN %
January
February
March
April
May
June
July
August
September
October
November
December
Year
2013
2014
2015
2016
Fund
Fund
Fund
Fund
Fund
-0.25
1.38
-2.91
-4.06
-0.48
-1.80
1.44
1.71
-2.42
-1.09
-8.32
-0.27
0.57
2.63
0.67
3.86
0.83
1.15
2.55
0.70
2.60
0.33
-0.48
16.12
8.03
0.06
0.90
-1.73
-0.39
-2.97
-0.38
-4.73
-2.88
3.98
3.37
-4.06
-1.53
0.03
0.93
3.13
2.29
-1.24
5.31
1.41
1.02
0.38
2.55
-2.91
1.82
15.48
0.45
3.76
1.66
-0.99
-0.65
-0.44
DPAM is signatory of the United Nations Principles for Responsible Investment (UN PRI).
Please read the important information at the end of this document.
2017
3.77
3
IMPORTANT INFORMATION - FOR AUTHORIZED USE ONLY
The information contained in this document and attachments (hereafter the ‘documents’) is provided for pure information
purposes only.
Present documents do not constitute investment advice nor do they form part of an offer or solicitation for the purchase of
shares, bonds or mutual funds, or an invitation to buy or sell the products or instruments referred to herein.
Applications to invest in any fund referred to in these documents can only validly be made on the basis of the Key Investor
Information Document (KIID), the prospectus and the latest available annual and semi-annual reports. These documents can be
obtained free of charge at Degroof Petercam Asset Management sa or on the website funds.degroofpetercam.com.
All opinions and financial estimates herein reflect a situation at the date of issuance of the documents and are subject to change
without notice. Indeed, past performances are not necessarily a guide to future performances and may not be repeated.
Degroof Petercam Asset Management sa (“DPAM”) whose registered seat is established Rue Guimard, 18, 1040 Brussels and
who is the author of the present document, has made its best efforts in the preparation of this document and is acting in the
best interests of its clients, without carrying any obligation to achieve any result or performance whatsoever. The information is
based on sources which DPAM believes are reliable. However, DPAM does not guarantee that the information is accurate and
complete.
Present documents may not be duplicated, in whole or in part, or distributed to other persons without prior written consent of
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