Finisterre Capital, the long/short emerging market total return specialist, has launched a stand-alone, UCITS compliant fund in response to client demand stemming from Solvency II requirements.
The UCITS-compliant Finisterre Emerging Market Debt Fund launched with USD55m of seed capital and deploys a similar long/short approach to that operated across Finisterre’s existing strategies. The fund has an unconstrained mandate, and will invest in a blend of global emerging market sovereign and corporate credits, local fixed income instruments, local and hard currencies and other debt securities. The fund seeks to generate high single digit returns over the cycle and offers bi-weekly liquidity.
Paul Crean, co-founder and chief investment officer of Finisterre, says: “The Finisterre EM Debt Fund does not track our hedge funds and has its own investment team. The fund will be able to make use of derivatives to express its views and we have the right skill set to hedge for duration risk, spread risk and to apply a macro top-down approach. The long/short strategy employed by the fund will be more diversified, have a lower turnover and have a longer term investment horizon than Finisterre’s traditional hedge fund strategies.
“As central bank liquidity is withdrawn and interest rates begin to rise, the emerging market debt environment is likely to become more challenging and returns harder to find. It will be increasingly important to differentiate from the ‘double deficit’ emerging economies and those less dependent on cheap debt with strong fundamentals. A long/short view with real shorts in place is the best way for investors to approach emerging markets.”
The EM Debt Fund will be managed by Crean and Christopher Watson, supported by a wider 16-person investment team. The fund aims to generate medium to long term returns from a combination of current income and capital appreciation and is part of the Principal Global Investors Funds range of Dublin-based UCITS and is registered in most major European countries.