Vontobel Fund - Emerging Markets Corporate Bond

Why invest?

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

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 fund managers deliberately avoid global rates risk and currency risk, instead concentrating on the credit component.

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 2 trillion US dollars, the emerging market corporate bond universe is twice 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 counterparts¹. Also, it is the asset class within emerging market debt with the lowest duration and volatility¹. 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, 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 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 exploit the situations that they sometimes provoke! These trades are highly rewarding, truly diversified strategies, but above all, decorrelated from the broader markets because price action is issuer specific. In a nutshell we aim for, pure, uncorrelated and idiosyncratic alpha!

1. Source: J.P. Morgan, as of 31.12.2018

Investment philosophy – inefficiencies lead to opportunities

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

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 wider Zurich based Fixed Income boutique. This optimal team structure enables proactive early idea generation and implementation.