Threadneedle has launched a fund that invests in local emerging market debt and currencies.
The Threadneedle Emerging Market Local fund is managed by Richard House, who has 15 years’ experience of local emerging market debt.
The fund is designed to capture the yields available in local emerging markets and the relative undervaluation of the currencies.
The split between emerging market government bonds and local currencies is approximately 50/50. Its benchmark is an equal split between the JPM Government Bond index-Emerging Markets and JPM Emerging Local Markets index.
House (pictured) says: “The medium-term view is that most emerging currencies are cheap. In the medium to long term they are going to appreciate against the dollar. [Also] as a retail investor it’s quite hard to get access to emerging market bonds.”
House says the stability of emerging markets has led to an increase in governments issuing bonds in their own currencies. As a result domestic yield curves have developed with some extending past 20 years.
“There’s more investors in the asset class and most countries have developed their pensions [market], so the pool of assets has grown,” says House.
The fund, which has a total universe of 24 countries, is able to take off-index bets and invest up to 20% in emerging market corporate debt.