The Baring Emerging Markets Corporate Debt Fund will invest at least 70% of its portfolio in emerging markets debt securities and can invest in both investment grade and non-investment grade debt instruments.
Ali said: "In an environment of low yields and heightened equity market volatility, an increasing number of investors are becoming attracted to the robust fundamentals and income-generating potential of emerging markets corporate debt.”
The dollar-denominated fund uses a currency overlay referencing the JP Morgan Emerging Markets Local Currency index to hedge its currency exposure back to EM local currencies. The manager expects emerging market currencies to appreciate against developed market currencies over the long term.
At launch, Ali favours countries displaying strong growth fundamentals and robust domestic demand. The manager says India’s domestic dynamics and low export dependence make it attractive, while he is also finding opportunities in Brazil’s consumer sector.
The manager also highlighted the Middle East, noting that it has been the best performing region over the last year. Barings says the Middle East risk premium over US Treasuries is likely to contract further over the remainder of the year.
Ali added that a strategy focusing higher rated credits is currently the most appropriate owing to the weak global growth outlook, although he could concentrate less on investment-grade debt if sentiment starts to improve.
“Improved economic data, particularly from China, would likely hasten a marked improvement in investor sentiment and lead us to become more positive on lower rated credits,” the manager explained.
The fund has a minimum investment of £2,500 in its sterling retail share class and carries an annual management fee of 1.25%.
