UK fund manager Eurizon SLJ Capital has launched a number of new funds targeting the emerging market bond sector. The Eurizon SLJ Bond Aggregate RMB Fund will invest in the growing Chinese bond market, which is now valued at $ 17 trillion.
The new fund is managed by Stephen li jen and Monica Wang and will invest in renminbi-denominated debt securities traded on the China interbank bond market or other regulated markets in China and Hong Kong. The fund will use the Bloomberg Barclays China Treasury Total Return Index as a benchmark.
The opportunity for investors in the Chinese bond market
The fund is launched because Eurizon SLJ Capital believes that the Chinese bond market is now too big to be ignored and that international investors will become increasingly interested in this emerging asset class. The timing is good as China appears to have weathered the effects of the pandemic much better than many other countries and investor interest is now firmly on the market.
The Chinese local bond market is considered underserved despite the size of its economy. The participation of foreign investors in the entire bond market is around 2%. China’s onshore bond markets really stand out against the global bond universe. The nominal yields for government bonds are above 3% at a point in time when German bonds are regularly in the negative yield zone.
Chinese bonds also offer exposure to long-term global trends – e.g. B. the inclusion of Chinese bonds in global benchmarks for government bonds.
“Today, China is the second largest market for government bonds in the world with an outstanding issuance of around USD 14 trillion. Hence, global bond investors simply cannot afford to ignore this, ”he said Jean-Charles Sambor, Head of Emerging Markets Fixed Income at BNP Paribas.
Eurizon SLJ Capital is also launching an emerging market bond fund that focuses on bonds issued in local currencies rather than US dollars. This is a strategy that invests in a wide range of sectors, ratings, durations, and durations. It’s a large and potentially much more exciting universe of emitters, but in our view the risk remains higher as the overall impact of COVID on economies, issuers and companies in emerging markets remains undefined.
Local governments and corporations are now much more active in the area of local issuance, which means fund managers have a wider range of bonds to play with.
Eurizon SLJ Local Emerging Markets Debt is managed by Yasmine Ravai, who has been in the EM field for 26 years, with the help of Alan Wilson.
Joint venture with Eurizon Capital
Eurizon SLJ Capital was founded in 2016 through the merger of Jen and Yilmaz ‘SLJ Macro Partners with Eurizon Capital SGR. Eurizon is the asset management arm of the Intesa Sanpaolo Group, one of the fastest growing asset managers in Europe. Jen and Yilmaz retain a 35% stake in the business.
The company has been heavily focused on investing in emerging markets. The solutions include investment management of discrete mandates, UCITS funds, bespoke modeling and FX overlay services.
Both funds are available on UK IFA platforms. Retail investors should discuss these with their financial advisor.