Schroders’ decision to launch three funds in one go came as more of a surprise than its choice to expand in EMD, a sector that until quite recently was pretty much out of bounds to retail investors. As Esther Armstrong pointed out in her recent assessment of the sector, its AUM has jumped more than $100bn to a total of $106bn in less than three years.
The frenzy of activity from UK fund groups cannot be denied. BlackRock, Standard Life, Barings and JPMorgan have all added to their expertise in the sector in recent months, while HSBC, Investec, First State and BNY Mellon (through Standish) are among those who have rolled out EMD vehicles within the past year.
This is a niche poised to mushroom in popularity, so much so that the IMA may wish to reassess how it categorises the available funds (currently classed within its Global Bonds sector). So what is Schroders offering that will separate it from the crowd?
That it is launching three funds at once – including a blended option to invest in sovereign and corporate debt – does grant investors options to choose which route to take into what is still an immature market.
Extra flexibility
To be headed up by Ranjeev De Mello, the ISF Emerging Markets Corporate Bond Fund will initially focus on investing in hard currency issues. However, the manager has been granted the flexibility to diversify into local currency corporate bonds, singled out as an area with enormous future growth potential, as and when appropriate.
Latin American fixed income head James Barrineau and team mates Alexander Moseley and Fernando Grisales may not be household names here, though they do have a track record working together, most notably at AllianceBernstein and then boutique Ice Canyon.
That UK fund groups have been spending so much time and money behind the scenes in building up their EMD teams suggests that expertise in this field trades at a premium. Let’s hope that these new names can live up to investors’ mounting expectations.
