Union Bancaire Privée (UBP) is expanding its sovereign emerging market fixed income range with the launch of a new frontier market strategy.
The UBAM – Emerging Markets Frontier Bond fund aims to take advantage of risk premiums overestimating default probabilities and underestimating recovery values, alongside the opportunities offered by the recent market sell-off.
Managed by the UBP Emerging Market Fixed Income team and lead portfolio manager Thomas Christiansen, the fund will target double-digit returns using a bottom-up approach. It will utilise deep fundamental knowledge and analysis of each country and security, with a specific framework designed to address bonds at risk of distress and potential defaults.
UBP notes that frontier markets have grown rapidly in the past decade, and are an increasingly important part of the emerging market debt and global fixed income universe. Less than 15 years ago, frontier markets consisted of only 10 countries with a combined market capitalisation of $ 20 billion. It has now grown to 35 countries making up a $ 100 billion market capitalisation today.
Nicolas Faller, co-chief executive officer of asset management and head of institutional sales at UBP, believes that the new strategy will meet growing client demand for innovative solutions in frontier markets, that will provide them the chance to both generate yield and diversify their portfolios.
He explaied: “Our analysis shows frontier debt to be an effective diversifier to global balanced portfolios. This new fund is therefore particularly attractive for investors as part of their wider asset-allocation considerations.”
Mr Christiansen noted that frontier markets provide superior diversification on average than sovereign bonds in emerging markets .
He said: “We expect this long-term positive trend to continue despite the fact that, with the combined effect of a global economic slowdown triggered by the coronavirus and heightened tensions in oil markets, emerging market frontier bonds have been and will likely remain particularly volatile for now. In addition, the recent sell-off provides investors with the opportunity to access these markets at yields that are much higher than they have been in recent years.”
The fund is currently available to investors in Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden, Singapore and the United Kingdom.
