IMA to create emerging market bond sector in fixed income overhaul

OOC Philip Martin

The Investment Management Association plans to launch a new sector for emerging market bond funds at the end of the year, Fundweb can reveal.

An update published by the trade body yesterday shows that the IMA Global Emerging Markets Bond sector will be created on 31 December 2013, while a number of changes will be made to other fixed income sectors.

Funds will be able to enter the new sector if they invest at least 80 per cent of their assets in emerging market bonds as defined by a recognised emerging markets bond index. Funds must also be geographically diversified.

Emerging market debt is an established asset class, with larger funds investing in the space including Simon Lue-Fong’s £7.8bn Pictet Emerging Local Currency Debt, Michael Hasenstab’s £5.4bn Templeton Emerging Markets Bond and Michael Gomez’s £5bn Pimco GIS Emerging Local Bond funds.

Other changes in the IMA’s fixed income project include amending the £ High Yield sector so members must hold at least 80 per cent of their assets in high yield bonds and treating hybrid securities such convertibles and preference shares as non-core in the £ Strategic Bond and Global Bonds sectors.

In addition, the definition of the Global Bond sector will be clarified to reflect the creation of the new Global Emerging Markets Bond sector.

All the amendments to sector definitions will also come into force on 31 December 2013. Funds will have until 31 March 2014 to comply with the new definitions.