Commentaries

March 2021 - Credit selection within the “safest” EM segment - Tactical Fund Manager's Comments

13 April 2021

Hasan Aslan

 

Asia USD bonds – asset class highlights

  • The rapid expansion of the Asian hard currency bond market makes it an unmissable asset class for global asset allocators
  • The structure of the asset class’ buyers makes it less vulnerable to global selloffs than in the past
  • Asian hard currency bonds offer attractive yields in respect to credit/interest rate risks
  • The Asian default rates over the past years have been lower than the Emerging Markets average
  • Asian countries present today better fundamentals than other Emerging Markets overall

Limited volatility and higher Sharpe ratio

From a risk/reward perspective Asia USD credit offers the most attractive option across the three Emerging Markets regions.

12-month rolling volatility in Emerging Markets USD credit

Source: Bloomberg, as of 31.03.2021

Asia in the time of Covid-19

The case for investment in Asia is fortified by the resilience during the maelstrom of 2020. The regional outperformance in COVID management has been fairly evident:

  

Confirmed Covid-19 cases

Source: Bloomberg, as of 07.04.2021

Considering the population of Asia is anywhere between 2 to 10x larger than the regions compared, the lower total case count attests to the relative success of Covid-19 management in Asia. This was clearly seen in the relative outperformance in Asian GDP, specifically DM/North Asia versus the globe. When also considering the strong starting fiscal and monetary positions, the argument for being overweight Asia is strong.

RAM Asia Bond Total Return Fund

With increased demand over the past months, RAM Asia Bond Total Return Fund’s AuM have now reached USD 105 million. Our solution offer investors the following advantages:

  • Access to highly experienced Asia-based credit investment team, reinforced by RAM’s risk management infrastructure.
  • A longstanding track record (over 8 years) with a focus on risk-adjusted returns
  • Differentiation from passive benchmark products in:
    • Credit selection
    • Systematic capital allocation
    • Active rebalancing
  • Non-correlated allocations to diversify returns through:
    • Off-benchmark regions (e.g. MENA, Australia, Japan)
    • Convertible bonds
    • Local currency denominated debt
    • Special Situation positions

  

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Global Bond Total Return

Asia Bond Total Return