The asset management firm is expecting returns of 5-6 per cent for the fund.
Asset manager Muzinich & Co has launched the Muzinich Emerging Market Debt Fund for investors aiming to venture into capital growth opportunities in EM credit.
The Ireland-domiciled OEIC fund, which is expecting to achieve returns around 5-6 per cent, complements the existing Muzinich Emerging Market Short Duration Fund by giving investors to the higher return potential available from regular duration emerging market credit, the firm said in a statement.
The new fund is benchmarked against the BofA Merrill Lynch Emerging Markets Corporate Liquid Index (EMCL). Warren Hyland, who is manager of both funds, and his team are aiming to outperform the index by around 150 basis points over a market cycle.
“The economic cycle is shifting. We’re moving from an environment where deflation and economic slowdown were the primary concerns to one of reflation and rising interest rates, where growth drivers are coming to the fore,” Hyland said. “That means we are seeing more opportunity for capital gains from regular duration emerging market debt, as opposed to short duration, which is more focused on capital preservation and about clipping emerging markets’ superior coupons.”
The fund will invest in hard currency denominated debt – currencies commonly used in international trade and capital markets, such as the US dollar, yen, euro and sterling. This avoids investors being exposed to risks associated with investing in local currencies.
“Currency markets can be very volatile and this is especially the case for emerging markets. Our expertise is in bottom-up, fundamental credit research, which Muzinich has been doing very successfully for more than 30 years,” Hyland added. “Our core approach to credit investing – whatever the underlying market – remains an explicit focus on capital preservation, achieved by undertaking rigorous bottom-up credit research into each and every company we consider for our portfolios, and only loaning money to companies that we believe will be able to meet their debt repayments over the term of the bond."