The fund will aim for average duration of two years.
It will be run by the GSAM global emerging markets debt team, which already manages $40bn. The long-only portfolio will invest in around 50 to 60 issuers across 30 countries.
Tactical EMD allocations beyond retail investors
The Luxembourg-domiciled Ucits is being offered to retail clients alongside institutional investors. However, Tilney managing director Jason Hollands said the fund looks best suited to professional investors with a cautious outlook on the asset class who therefore want an allocation less sensitive to changes in the yield curve.
“For most advisers and private clients though, any allocations to EMD are going to be a very small component of a portfolio and strategic rather than tactical in nature,” Hollands said. For these investors, duration decisions can be outsourced to a fund manager with the ability to invest across the spectrum.
GSAM head of international retail business Nick Phillips said short-duration EM debt allows investors to capture the asset class’s yield with reduced volatility.
Axa World Funds Emerging Markets Short Duration Bonds would be the rival fund for the GSAM team to beat, said Willis Owen head of personal investing Adrian Lowcock. A decade ago there would not have been the opportunity set or demand for a short duration EM debt fund, Lowcock said, highlighting how much the asset class has developed.
EM debt was the place to be in 2018, he added. The JP Morgan Emerging Market Bond Index (GBP) returned 1.75% in 2018.