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Emerging Markets Corporate Bond Strategy

Fixed Income

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Why invest?

  • Multitude of countries, industries and companies offer true diversification to any portfolio
  • We believe our tried and tested value approach can offer stable and recurring income, enhanced by specific event-driven stories
  • Deep knowledge of issuers and their decision makers allows us to seek bottom-up ideas decorrelated from the broader market and global interest rates

"In emerging market corporates there are always bonds that offer income and capital gains for an active manager who knows where to look."

Wouter Van Overfelt, Head of Emerging Markets Bonds

Our investment process

We take a deeply contrarian approach to emerging market corporate bonds, aiming to take advantage of the dislocation in valuations that often present themselves in this inefficient and news-flow driven asset class.

We take a four-step process, which combines top-down strategic themes and bottom-up analysis with a focus on maximizing credit remuneration. The strategy managers deliberately avoid global rates risk and currency risk, instead concentrating on the credit component.

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Investment opportunity – emerging corporates are a growing asset class

The size of the emerging market corporate debt universe comes as a surprise to many investors. At 1.4 trillion US dollars, the emerging market corporate bond universe is about the size of US dollar denominated emerging sovereigns1. With an average rating of BBB-, the credit quality of the corporates is better than their sovereign counterparts. Also, it is the asset class within emerging market debt with the lowest duration and volatility2. With the multitude of countries, industries as well as unique issuers in different phases of the economic cycle, there is a broad set of opportunities available, providing a combination of favorable yield and income. As the growth differential versus developed markets is increasing in the emerging markets’ favor, we believe this space is set to rise further.

The main story though is the prolific inefficiencies in the emerging corporate bond space, which makes it an active manager’s paradise. We aim to take advantage of these inefficiencies by complementing our tried and tested value-driven strategies with event-driven opportunities. As contrarian, bottom-up investors, we actively seek stories which other managers avoid. What’s more, we seek to exploit the situations that they sometimes provoke! We believe these trades are highly rewarding, truly diversified strategies, but above all, uncorrelated from the broader markets because price action is issuer specific. In a nutshell we aim for, pure, uncorrelated and idiosyncratic alpha.

1. Source: EMBI Monitor from JP Morgan and as of 1st November 2021
2. Source: JP Morgan

Investment philosophy – inefficiencies can lead to opportunities

Segmented markets and risk aversion can offer high return, low volatility and decorrelated opportunities. Our investment philosophy rests on two inefficiencies and sources of performance:

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Investment team

The fund is managed by Wouter Van Overfelt and Sergey Goncharov of the Emerging Market Bonds team. The team also has at its disposal the full capabilities of the Zurich- based Fixed Income boutique. We believe this optimal team structure enables proactive early idea generation and implementation.

 

Emerging Markets Corporate Bond Composite

 
 

Source: Vontobel. The composite inception date is December 1, 2015. The composite‘s gross rates of return are presented before the deduction of investment management fees, other investment-related fees, and after the deduction of foreign withholding taxes, brokerage commissions and transaction costs. An investor’s actual return will be reduced by investment advisory fees. The composite‘s net rates of return are presented after the deduction of investment management fees, brokerage commissions, transaction costs, other investment-related fees and foreign withholding taxes. Results portrayed reflect the reinvestment of dividends and other earnings. The comparison to an index is provided for informational purposes only and should not be used as the basis for making an investment. There may be significant differences between the composite and the index, including but not limited to the risk profile, liquidity, volatility and asset composition. The J.P. Morgan Corporate Emerging Market (CEMBI) Broad Diversified index is the flagship index traking the performance of US dollar-denominated bonds issued by emerging market corporate entities. The CEMBI Broad Diversified aims to achieve a broader issuer coverage as well as a sectoral and regional balance by including bonds with an outstanding face amount of US$ 300 mm or more and capping the country weights to a maximum of 10%. The index is rebased monthly on the last trading day of the month. Past performance not an indication of future results. Returns more than one year are annualized. Please refer to the Disclaimer tab for additional explanations regarding composite disclosure and other Important Information.

Emerging Markets Corporate Bond

Composite description

The composite includes all share classes of pooled funds and all segregated accounts with the investment strategy Emerging Markets Corporate Bond with USD as base currency. This investment strategy invests in the fixed-income asset class by purchasing bonds, notes and similar fixed-interest and floating-rate securities, including convertibles and warrant bonds, denominated mainly in hard currencies with possible marginal diversification to local currency. Issuers can be corporate, sovereign or quasi sovereign of any rating, domiciled in, having their business activity in or exposed to emerging markets. Derivatives – forwards, futures and currency swaps – are used for hedging purposes and efficient portfolio management. Non-USD hard-currency risk is hedged back into USD, while the maximum net exposure to emerging local currency debt is 10%. The strategy aims to outperform the J.P. Morgan CEMBI Broad Diversified Total Return Index by at least 1.75% per annum, gross of fees over a three year rolling period.

Benchmark description

J.P. Morgan Corporate Emerging Market Bond Index (CEMBI) Broad Diversified Total Return (since inception)

Claim of compliance

Vontobel Asset Management claims compliance with the Global Investment Performance Standards (GIPS®).

Firm definition

Vontobel Asset Management is a multi-boutique asset management firm established in 1988 and regulated by the Swiss Financial Market Supervisory Authority FINMA. For GIPS Compliance purposes, Vontobel Asset Management is defined to include assets managed in the Fixed Income, the Conviction Equities, the Quantitative Investments and the Multi Asset boutiques across all global offices and includes both the management of institutional segregated accounts and pooled funds.

For the United States, advisory and investment management services are offered by Vontobel Asset Management, Inc. (“VAMUS”). VAMUS is an investment advisory firm registered with the Securities and Exchange Commission, under the Investment Advisers Act of 1940, as amended, and a subsidiary of Vontobel Holding AG, Zurich, Switzerland. Note: Regarding investment management, all accounts in the composite are managed by the same investment team. However, there are accounts in the composite not offered by VAMUS but by other Vontobel affiliated entities.

List of composites and how to obtain a GIPS Report

To receive additional information regarding Vontobel Asset Management, including a GIPS Composite Report for the strategy presented in this advertisement and a list of all composite descriptions managed by the firm, contact the GIPS Compliance Office at gips@vontobel.com or write Vontobel Asset Management AG, GIPS Compliance Office (G27 611), Gotthardstrasse 43, 8022 Zurich, Switzerland.

Fee schedule

The current annual investment management fees charged for segregated accounts are: 0.55% on the first $100 million, 0.45% over $100 million. The current investment management fee schedule for the Vontobel Fund - Emerging Markets Corporate Bond, which is included in the Emerging Markets Corporate Bond Composite, is 0.55% on all assets for institutional share classes. The latest total expense ratio (TER) for the Vontobel Fund - Emerging Markets Corporate Bond is 0.80% for institutional share classes.

Investment management fees for advisory services offered by VAMUS may differ from what’s noted above. Fees charged are negotiable and further described in Part 2 of Form ADV for VAMUS.

Past performance and investment risk

Past performance is not indicative of future results. Investing involves risk, including possible loss of principal. Value and income received are not guaranteed and one may get back less than originally invested.

CFA Institute

GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

Important Information

This document has been prepared and approved by a company of the Vontobel Group (“Vontobel”) for informational purposes only and does not constitute an offer, solicitation or recommendation to buy or sell any investment securities or strategies discussed, to effect any transactions or to conclude any legal act of any kind whatsoever. This information should not be considered investment advice or any other kind of advice on legal, tax, financial or other advice or a recommendation to purchase, hold or sell any investment. No representation is given that the securities, products, or services discussed herein are suitable for any particular investor.

The index comparisons are provided for informational purposes only and should not be used as the basis for making an investment decision. Further, the performance of the composite and the Index may not be comparable. There are significant differences between the composite and the indices referenced, including, but not limited to, risk profile, liquidity, volatility and asset composition. Please note that an investor cannot invest directly in an index.

Any projections contained above are based on a variety of estimates and assumptions. There can be no assurance that the assumptions made in connection with the projections will prove accurate, and actual results may differ materially. The inclusion of projections should not be regarded as an indication that Vontobel considers the projections to be a reliable prediction of future events and projections should not be relied upon as such.

There can be no assurance that investment objectives will be achieved. Clients must be prepared to bear risk of a total loss of their investment.

Past performance is not a reliable indicator of current or future performance. The return may go down as well as up, e.g. due to changes in rates of exchange between currencies. The value of invested monies can increase or decrease and there is no guarantee that all or part of your invested capital can be redeemed.

Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The Index is used with permission. The Index may not be copied, used, or distributed without J.P. Morgan's prior written approval. Copyright 2021, J.P. Morgan Chase & Co. All rights reserved.

Please refer to Form ADV Part 2A for additional information on the strategy which includes Vontobel’s investment advisory fees.

Vontobel Asset Management, Inc. (Vontobel) is registered with the U.S. Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended, in the USA. Registration as an Investment Advisor with the U.S. Securities and Exchange Commission does not imply a certain level of skill or expertise. Advisory services for strategy discussed herein are offered through a Participating Affiliate structure between Vontobel Asset Management, Inc., Vontobel Asset Management AG, and Vontobel Asset Management Asia Pacific Ltd.

Although Vontobel believes that the information provided in this document is based on reliable sources, it cannot assume responsibility for the quality, correctness, timeliness or completeness of the information contained in this document. Except as permitted under applicable copyright laws, none of this information may be reproduced, adapted, uploaded to a third party, linked to, framed, performed in public, distributed or transmitted in any form by any process without the specific written consent of Vontobel. To the maximum extent permitted by law, Vontobel will not be liable in any way for any loss or damage suffered by you through use or access to this information, or Vontobel’s failure to provide this information. Our liability for negligence, breach of contract or contravention of any law as a result of our failure to provide this information or any part of it, or for any problems with this information, which cannot be lawfully excluded, is limited, at our option and to the maximum extent permitted by law, to resupplying this information or any part of it to you, or to paying for the resupply of this information or any part of it to you. Neither this document nor any copy of it may be distributed in any jurisdiction where its distribution may be restricted by law. Persons who receive this document should make themselves aware of and adhere to any such restrictions.

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