Fixed Income  

Investec AM’s Aird allays fears over EMD fund

David Aird has dismissed any worries about the capabilities of the Investec Emerging Markets Local Currency Debt fund, after it nearly halved in size in the past six months.

The fund, launched by Investec Asset Management in 2006 and one of the first emerging market debt funds to be marketed to the UK retail market, has shrunk by nearly £1bn between May 21 and November 26, according to figures from FE Analytics.

This represents a 40.1 per cent fall in the assets in the fund – from £2.3bn to £1.3bn.

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During the same period the fund suffered negative performance of 16.4 per cent, as emerging market debt as an asset class sold off due to worries about the withdrawal of US quantitative easing, but the fall represents significant outflows on top of the performance drop.

However, Mr Aird, managing director of UK distribution at Investec, said across its global investment mandates the emerging market debt team’s assets had only dropped marginally – from $18.7bn (£11.4bn) to $18.5bn – and that sharp decline in assets was just on the local currency retail fund.

He said: “We are seeing no drop off globally for the asset class. In any book of business you will have froth on top that will blow away occasionally when flighty investors are spooked by the volatility in the asset class, but the bedrock is firm.”

Mr Aird blamed retail investors, who tend to “take cover when markets fall”, for the decline in assets in the retail fund. But he also acknowledged there were far more rival emerging market debt funds than there were in 2006, which would have influenced fund flows for the Investec fund.

“There are more funds out there and we cannot own all the assets,” he said.

He insisted the large drop in assets in a relatively short space of time would not have impacted the performance of the fund, saying the local currency emerging market debt market was liquid enough to handle the forced selling of assets.

“There is no way we can run $18.5bn and have worries about a fund that is £1.5bn, so there is no liquidity issue,” he said.

Apart from the Investec fund, no other retail-focused emerging market debt funds have suffered the same scale of outflows, except for the Threadneedle Emerging Market Bond fund. It shrunk from £975m to £325.1m, mainly due to the Jupiter Merlin multi-manager team withdrawing £400m from the fund in July.

Mr Aird insisted the fund would “of course” recoup the lost assets due to the long-term opportunity for growth that he sees in emerging market debt.