Thursday, May 05, 2011
Aberdeen Offers an EM Currency Fund
News summary by MFWire's editors
Aberdeen Asset Management Inc. [see profile]
is looking to tap investors' appetite for fixed income bets with the launch of the Aberdeen Emerging Markets Debt Local Currency Fund
The fund is managed by Aberdeen’s Emerging Market Debt Team, led by Brett Diment
, and bets at least two-thirds of its portfolio assets in fixed income securities denominated in the local currencies of emerging markets.
“Looking beyond short-term sentiment, the structural case for greater allocations into emerging markets will remain intact, supported by a still healthy growth outlook, and more favorable fiscal positions and lower debt levels than developed world countries," stated Diment. "Emerging market debt should also benefit from improving credit fundamentals, enhancing what is now an investment-grade asset class."
Aberdeen Asset Management Inc. (“Aberdeen”) has launched the Aberdeen Emerging Markets Debt Local Currency Fund (Class A Ticker: ADLAX), in response to rising interest in the asset class.
The Fund is managed by Aberdeen’s Emerging Market Debt Team, led by Brett Diment. It seeks to provide long-term total returns by investing at least two-thirds of the portfolio assets in fixed income securities denominated in the local currencies of emerging markets.
Investors are increasingly allocating assets to emerging market local currency bonds as they look to diversify their fixed income portfolios. Concerns over the financial health of developed countries have led investors to re-evaluate global benchmarks based on amounts of debt outstanding rather than the strength and growth potential of economies.
The emerging market local currency debt market has grown significantly in recent years, and is now roughly two to three times the size of the hard currency debt market. Having drawn on lessons from past funding crisis periods, emerging market countries have over the past decade focused on developing their local yield curves to meet financing requirements. This development has had two significant impacts: it has reduced the dependence on external financing, and has resulted in deeper, and more liquid local government bond markets.
Aberdeen expects this trend to continue in the coming years, which in turn is expected to reduce sovereign default risk.
The benefit of currency appreciation also supports the investment in local currency debt. More favorable fiscal positions and debt levels and the higher growth potential of emerging markets may, over time, result in stronger currencies compared to the developed world.
Emerging market local currency bonds not only have higher yields than hard currency bonds, but are also a higher-rated asset class, with over 80% of the local currency bond index now investment grade compared with around 53% of the hard currency index. These are also trends that Aberdeen believes will continue over the coming years, with the local index expected to be essentially 100% investment grade, with the upgrade of Indonesia and Turkey, in the next few years.
Brett Diment, Head of Emerging Market Debt at Aberdeen, comments:
“Looking beyond short-term sentiment, the structural case for greater allocations into emerging markets will remain intact, supported by a still healthy growth outlook, and more favorable fiscal positions and lower debt levels than developed world countries. Emerging market debt should also benefit from improving credit fundamentals, enhancing what is now an investment-grade asset class."
“Assessing the broader opportunity set, we think local currency debt offers the best return
opportunities, with the index yield now above 7%. Investors can also benefit from structural
currency appreciation in emerging markets, despite efforts by policy makers to stem the strength of their respective currencies. Local currency debt may offer less appeal over the short term, during a period of rising inflation and lax monetary policies, but as inflation pressures ease, it will be poised to outperform global fixed income assets. We are also optimistic about many emerging market corporates which are attractive compared to both emerging market government bonds and developed market credits.”
About Aberdeen Asset Management
Aberdeen is an established and leading manager of emerging market debt with clients located around the world. The 10-strong team manages more than US$5 billion within segregated mandates and open-end and closed-end funds.
Aberdeen Asset Management Inc is the wholly-owned U.S. subsidiary of Aberdeen Asset Management PLC, a global investment management group which is headquartered in Aberdeen, Scotland, and manages more than $290.4 billion of assets for both institutions and private individuals.
Philadelphia is home to the U.S. equity and fixed income investment management teams, as well as U.S. client servicing, consultant relations, business development and other operational staff: more than 180 employees in total. Aberdeen manages and services approximately $53 billion in total assets on behalf of North American and international clients. For more information, visit www.aberdeen-asset.us
All data is as of March 31, 2011 unless otherwise noted.
Fixed income securities are subject to certain risks including, but not limited to interest rate, futures, credit, prepayment, extension and call risk. Foreign securities are more volatile, harder to price and less liquid than U.S. securities. These risks are enhanced in emerging market countries. Since the Fund invests in securities denominated in foreign currencies, changes in currency exchange rates may significant impact the Fund’s return. The Fund may hold larger positions in fewer securities than other funds. Less diversified funds have greater risk than more diversified funds.
Investors should carefully consider a fund’s investment objectives, risks, fees, charges and expenses before investing any money. To obtain this and other fund information, please call 866-667-9231 to request a prospectus, or download a prospectus at www.aberdeen-asset.us. Please read the prospectus carefully before investing any money.
The Fund may hold larger positions in fewer securities than other funds. Less diversified funds have greater risk than more diversified funds.
Investing in mutual funds involves risk, including possible loss of principal. There is no assurance that the investment objective of any fund will be achieved.
The views expressed represent the opinions of Aberdeen Asset Management Inc. and are not intended as a forecast or guarantee of future results.
Aberdeen Funds are distributed by Aberdeen Fund Distributors LLC, Member FINRA and SIPC. 1735 Market Street, 32nd Floor, Philadelphia, PA 19103. “Aberdeen” is a U.S. registered service mark of Aberdeen Asset Management PLC.
Aberdeen Asset Management is the marketing name in the U.S. for the following affiliated, registered investment advisers: Aberdeen Asset Management Inc, Aberdeen Asset
Management Investment Services Ltd, Aberdeen Asset Management Ltd and Aberdeen Asset Management Asia Ltd (collectively, the ‘Aberdeen Advisers’). Each of the Aberdeen Advisers is wholly owned by Aberdeen Asset Management PLC
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