BNY Mellon  

BNY Mellon launches emerging market debt fund

BNY Mellon launches emerging market debt fund

The growth of bonds issued by less developed countries as an asset class has prompted BNY Mellon to launch an emerging market debt fund.

The fund, called BNY Mellon Emerging Market Debt Total Return fund, will be managed by Colm McDonagh, head of emerging market fixed income at Insight, a firm that is part of the larger BNY Mellon Group.

Emerging market assets have performed strongly over the past year due to strong economic growth and a weak dollar.

Traditionally many emerging market companies and countries can borrow only in dollars, as lenders do not wish to take on the extra volatility of being repaid in an emerging market currency.

So a weak dollar makes the repayments more affordable for the emerging market borrower, reducing the risk of default.

Mr McDonagh said: "Emerging market debt has undergone a dramatic transformation over the past two decades and today accounts for approximately 25 per cent of global fixed income with opportunities in more than 70 countries.

"Investors are increasingly moving away from constrained single-sector emerging market debt to strategies where the investment manager has the freedom to allocate across all opportunities at their own discretion.

"This fund dynamically allocates across countries and securities according to the relative attractiveness of sovereign, corporate and local currency debt.

"It responds to demand for a long-only emerging market debt strategy that aims to mitigate the cyclicality of single sector approaches, and also serves as a complement to Insight's existing emerging market strategies.

"We see this fund's dynamic and unconstrained approach as an evolution in the way investors will allocate to emerging market debt."

Jason Hollands, managing director for business development and communications at Tilney, said emerging market debt is one of the more attractive pockets of fixed income at the moment and is an area we have been adding to in recent months, with Ashmore the market leader in this asset class.

He said: "Emerging market debt is an area where existing product available is primarily cut between local currency and dollar denominated debt funds as the target market has historically been more institutionalised investors who will take their own view on where they want to be positioned.

"BNY Mellon's new product has the merit of a highly flexible remit to allocate dynamically across countries, local currency debt and dollar-debt, as well as both corporate credit and sovereign bonds, which might appeal to investors wanting a one stop shop approach to an emerging market debt allocation."

david.thorpe@ft.com