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Muzinich & Co launches short duration emerging market debt fund

Wed, 13/11/2013 - 15:42

Corporate credit specialist Muzinich & Co has launched an emerging market short duration corporate bond fund.

The Muzinich & Co Emerging Markets Short Duration Bond Fund, an Ireland-domiciled UCITS structure, will invest in a diversified portfolio of short duration investment grade and high yield corporate bonds from emerging markets-focused issuers.
The fund will focus on hard currency bonds and is managed by Warren Hyland and Christina Bastin.
“The potential returns from emerging markets are very compelling,” says George Muzinich, chief executive and founder of Muzinich & Co, “But due to the divergence of returns between countries and issuers, high quality active management is typically required to add real alpha.
“We believe our rigorous fundamental research and analytical process enhances our ability to select attractive opportunities. By focusing on shorter-term debt, we believe we are better able to control volatility, which can be higher in emerging markets than in more established ones.
“Creditworthiness of underlying issuers is paramount in portfolio construction. We focus on companies that have sound business plans and solid balance sheets. We do not invest in distressed or stressed situations. We aim to generally maintain the duration of the fund at no more than two-and-a-half years.”
Hyland adds: “Emerging market corporate debt is one of the fastest growing asset classes. It has the potential to provide very attractive risk-adjusted returns compared to alternatives such as developed and emerging market equities. 
“Many emerging market companies are in better financial shape than those in developed markets, with less debt and higher cash balances. Governance and transparency have also generally improved with time. Over the past few years the credit ratings of EM issuers have converged to a large extent with those of developed market issuers – yet coupons and yields remain more attractive. EM debt’s correlation with developed markets is also typically low, giving investors the potential to enhance returns while reducing overall portfolio risk.”

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