Navigating 5 years of emerging market corporate debt

Transcription

1 For professional investors and financial advisers - not for use by retail investors Navigating 5 years of emerging market corporate debt Aberdeen Global Emerging kets Corporate Bond Fund May 216

2 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. Relative size of markets (US$bn) 1EM corporates are a diverse asset class Among major fixed income asset classes, EM corporates have been expanding at a rapid pace since 29 when compared to other fixed income markets. With size comes diversification, both geographically and sectorally EM Corporates US US Leveraged EM hard High Yield Loans currency Sovereigns Assetbacked securities Commercial mortgagebacked securities Source: JP Morgan, 31 December 215. For illustrative purposes only EM Corporate Leverage & Liquidity 2Strong credit fundamentals Average credit metrics in EM corporates are stronger than their US high yield counterparts Jun 7 Jun 8 Jun 9 Jun 1 Jun 11 Global EM HY Net Leverage (x) US HY Net Leverage (x) Jun 12 Jun 13 Jun 14 Jun 15 Source: BofA Merrill Lynch Global Research, June Low default rates Despite the perception of higher risk in EM, default rates in the EM corporate universe are lower than developed markets. Default rates % F EM US high yield EM avg US high yield avg Source: JP Morgan, 31 December Performance Over the past 5 years the JP Morgan Corporate Emerging ket 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. YTM vs. 1 year annualised volatility % 1 US HY (B) Frontier (B+) 8 EM Corporates (BBB) EM LC Sovereign (BBB+) 6 4 US IG Corporates (A) US Treasury (AA+) 2 Euro Credit (A+) Eurozone IG (A+) year annualised volatility Source: JP Morgan, 31 December 215. 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 215. Past performance is not a guide to future results. 2 Navigating 5 years in emerging market corporate debt

3 Cumulative performance % % annualised returns since launch A st quartile for 1, 3 and 5 year performance amongst emerging market corporate bond funds B Fund Benchmark The Fund = Aberdeen Global Emerging kets Corporate Bond Fund. The Benchmark = JPM Corporate Emerging kets Bond Index, Broad Diversified Index. Source: Aberdeen Asset Management, April 216. 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 (2.5) 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 Based on gross returns Launch: April, 211. Source: Lipper, ch 216. B Based on Morningstar category of Emerging ket Corporate Bond Funds for the purpose of performance measurement. Navigating 5 years in emerging market corporate debt 3

4 Navigating the market The Aberdeen Global Emerging kets 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: 15 dedicated EM corporate debt professionals in London, Singapore, Kuala Lumpur and Thailand; and More than 8 dedicated emerging market professionals around the world. London Budapest São Paulo Singapore Jakarta Hong Kong Bangkok Kuala Lumpur 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, companies in over 7 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 reserve C Hutchison Whampoa, a Fortune 5 telecom and ports operator CNOOC Ltd, China s largest producer of offshore oil and gas D Grupo Globo, the largest media companyin Latin America E National champions $1.2 bn $1.1 bn $65 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 Guatemala F Banglalink, the second largest telecom company in Bangladesh G Figures are revenues for financial year 215 in US dollars. C Source: Gazprom webiste, April 216. D Source: CNOOC Ltd website, April 216. E Source: Grupo Globo website, January 216. F Source: FitchRatings, tember 215. G Source: EMC, April Navigating 5 years in emerging market corporate debt

5 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. Brazil Rio de Janeiro Russia Moscow Turkey Istanbul India Delhi Nigeria Lagos Chile Santiago Peru Lima Indonesia Jakarta Bangladesh Dhaka Thailand Bangkok Hungary Budapest China Shanghai China Shenzhen Malaysia Kuala Lumpur Azerbaijan - Baku Argentina Buenos Aires Navigating 5 years in emerging market corporate debt 5

6 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.com Other important information Aberdeen Global is a Luxembourg-domiciled UCITS fund, incorporated as a Société Anonyme and organized as a Société d Invetissement á Capital Variable (a SICAV ). The information contained in this marketing document is intended to be of general interest only and should not be considered as an offer, or solicitation, to deal in the shares of any securities or financial instruments. Aberdeen Global has been authorized for public sale in certain jurisdictions and private placement exemptions may be available in others. It is not intended for distribution or use by any person or entity that is a citizen or resident of or located in any jurisdiction where such distribution, publication or use would be prohibited. Aberdeen Global is not registered under the United States Securities Act of 1933, nor the United States Investment Company Act of 194 and therefore may not directly or indirectly be offered or sold in the United States of America or any of its states, territories, possessions, or other areas subject to its jurisdiction or to or for the benefit of a United States Person. For the definition of United States Person, see the current Aberdeen Global prospectus. No information, opinions or data in this document constitute investment, legal, tax or other advice and are not to be relied upon in making an investment or other decision. Subscriptions for shares in the Fund may only be made on the basis of the latest Prospectus and relevant Key Investor Information Document (KIID). These can be obtained free of charge from Aberdeen Asset Managers Limited, 1 Queen s Terrace, Aberdeen, AB1 1YG, Scotland and are also available on aberdeen-asset.com. Issued by Aberdeen Asset Managers Limited. Registered in Scotland No Registered Office: 1 Queen s Terrace, Aberdeen, AB1 1YG. Authorised and regulated by the Financial Conduct Authority in the United Kingdom. Aberdeen Asset Managers Limited reserves the right to make changes and corrections to any information in this document at any time, without notice /16