Pictet Funds, the investment fund distribution arm of Pictet & Cie, is launching a new fund covering local currency emerging debt. Like virtually all Pictet Funds products, it will be managed by Pictet Asset Management, Pictet’s institutional division. Pictet says that although emerging US dollar debt spreads have tightened dramatically over the last few years, in turn providing high returns, this is not expected to continue and that investors are now looking for returns elsewhere. The developing local currency debt markets have been able to offer these high returns and, Pictet claim, have the potential to continue to do so. The PF (LUX) Latin America Local Currency Debt fund is managed by Simon Lue Fong, PAM’s head of emerging debt, based in London. Local debt in this region has grown as governments bought back foreign-currency denominated bonds and started issuing bonds in their own currency. The market value of local debt has increased from $50 billion in the early 2000s to reach more than $250 billion. The demand/supply dynamic for local debt nonetheless remains favourable as demand for these local bonds is high and still rising, according to Mr Lue-Fong: “Latin American pension funds are the natural holders of these bonds and their assets are growing rapidly, moreover, other investors want in on the game. For example, foreign pension funds, mutual funds, hedge funds, petro-dollars, and central banks are all attracted to the region’s local bonds for additional returns and high coupons.”