hero-boutique-fixed-income-emerging-markets

Emerging Markets Debt Strategy

Fixed Income

Download Latest Fact Sheet 

Why invest?

  • A bottom-up driven approach with rigorous proprietary analysis to help optimize the credit and security selection, enabling us to aim for higher performance for a given credit risk.
  • Experienced and high conviction portfolio managers, backed by a compact, multi-disciplinary, and independent Fixed Income boutique.
  • A contrarian and value-investing style in order to help capitalize on irrational, herd-like investor behavior, while monitoring liquidity and diversification of our portfolio exposure.

"We aim to consistently deliver value to our clients by seeking to identify price discrepancies and invest with high conviction."

Luc D’hooge, Portfolio Manager, Analyst

Investment process

We take a five-step process that brings together top-down with bottom-up. We develop market thematic and country views and then dive into bottom-up credit selection to help improve yields and spread without penalizing the average rating of the portfolio.

By maximizing the payoff/credit risk ratio we aim to find recurring, low risk means of generating excess returns.

Typical behavior during consolidating markets 

  • During significant widening of spreads, mispricings present themselves and we tend to reinforce our exposure as bonds are easier to buy.
  • We accept that reinforcing right at the bottom is almost impossible.
  • We may underperform in periods of a deep correction as we add risk, but when markets stabilize and rebound, the portfolio performance tends to accelerate.

Typical behavior during rallying markets 

  • Invariably, mispricings continue to exist across regions, countries, curves, currencies, etc.
  • We tend to be overweight the market to help capture these mispricings

Typical behavior in overheating markets 

  • When we sense that the “dash for trash” is exaggerated, and investors are gobbling up anything they can get their hands on, we tend to exit, reduce exposure to spread duration, increase average rating, etc.
  • We find at these times it is easier to sell bonds
infograph-product-em-debt_en

Investment opportunity – seeking the best long-term risk-return rations

The emerging market bond asset class tends to be driven by short-term news flow, which often takes precedence over fundamentals, resulting in irrational investor behavior. This creates mispricing scenarios which can be exploited by active investors who are able to take a contrarian view when markets behave whimsically.

Despite its perception as an asset class with high volatility and greater risks, emerging market debt (in hard currencies) has historically delivered elevated long-term, risk-adjusted returns compared to other traditional asset classes. In comparison – while offering a greater return – emerging market debt volatility has been lower than US and global high-yield bonds. On the risk spectrum, emerging market hard-currency debt sits between traditional fixed-income segments and equities, making it a viable performance-generating addition to a well-diversified portfolio, in our view.

Investment philosophy – inefficiencies can lead to opportunities

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

infograph-boutique-fixed-income-em-inefficiencies_EN-US

Investment team

The strategy is managed by Luc D’hooge who is assisted by the Vontobel Emerging Market Bonds team, comprising of experienced portfolio managers with strong track records. 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 Debt Composite

 
 

 

Source: Vontobel. The composite inception date is June 1, 2013. 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 Emerging Market Bond Index (EMBI) Global Diversified is a uniquely weighted US dollar-denominated emerging markets sovereign index. It has a distinct diversification scheme which constrains a country’s weight by first adjusting the face amount outstanding and then applying an additional layer of maximum weight cap of 10%. Index rebalancing occurs monthly on the last US business day of each 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 Debt

Composite description

The composite includes all share classes of pooled funds and segregated accounts that mainly invest in bonds denominated in hard currency and similar fixed or floating-rate debt securities of private and public issuers domiciled in emerging markets. The term "hard currency" refers to currencies of developed and politically stable countries that are members of the OECD.

Benchmark Description

J.P. Morgan Emerging Market Bond Index (EMBI) Global 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 Debt, which is included in the Emerging Markets Debt Composite, is 0.55% on all assets for institutional share classes. The latest total expense ratio (TER) for the Vontobel Fund - Emerging Markets Debt is 0.78% 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.

Insights