Investments  

Neuberger Berman launches ‘alpha-driven’ EM fund

Daniel Liberto

The Neuberger Berman Emerging Market Debt Blend fund has been advertised as a more “dynamic and alpha-driven” solution to traditional fund-of-fund approaches and will invest in both hard and local currency emerging bonds.

The fund’s benchmark will be split between three different indices. There will be a 50 per cent weighting to the local currency JP Morgan GBI Emerging Markets Global Diversified index, a 25 per cent weighting to the US dollar hedged JP Morgan EMBI Global Diversified index, and a 25 per cent weighting to the US dollar hedged JP Morgan CEMBI Diversified index, which tracks corporate rather than emerging market debt. Management duties have been handed to Rob Drijkoningen and Gorky Urquieta, the two co-heads of Neuberger Berman’s emerging market debt team, who have managed emerging market debt strategies since 1994.

The duo’s team was boosted in May last year after 22 people were recruited to its emerging market debt desk, with 19 arriving from ING Investment Management.

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A spokesman for Neuberger Berman said that in normal market conditions it expected the fund to invest at least two-thirds in emerging market bonds, with a maximum of a third in money market instruments and debt securities.

Management fees on the fund will range from 0.8 per cent to 1.8 per cent, depending on the share class.

The launch of this fund followed the introduction of the Neuberger Berman Emerging Market Debt Hard Currency, Local Currency and Corporate Debt funds in July 2013 and the Neuberger Berman Short Duration Emerging Market Debt fund in December 2013.

REACTIONS

Provider view

Rob Drijkoningen, co-head of emerging market debt at Neuberger Berman, said: “We believe the breadth of our team gives us the expertise required to fully exploit alpha opportunities across this asset class.”

Dik van Lomwel, head of EMEA and LatAm at Neuberger Berman, added: “Many investors prefer to delegate the asset allocation decision within emerging market debt. Our investment team has the proven skills as well as the track record in this regard.”

Adviser view

Chris Daems, director of London-based Principal Financial Solutions, said: “While the fund may be useful I would suggest that the niche nature of its investment remit may mean that it will play a small part in most advisers’ portfolios at best. Also, I am not convinced an ‘alpha-driven’ approach within this particular asset class is the most appropriate approach.”

Charges

Management fees on the fund will range from 0.8 per cent to 1.8 per cent, depending on the share class.

Verdict

The global emerging market bond sector has performed well over the year after a difficult 2013, when it was overshadowed by concerns over the Federal Reserve’s tapering and currency depreciation. It is therefore no surprise to see fund managers take an increased interest in developing new solutions and specifically ones like this that take on different strategies, although the jury is still out on emerging markets in general and investors should be diligent about investing too much on such a play.