Ashmore Group, the specialist Emerging Markets asset manager that manages $51.8bn, as at 30 September 2024, has launched its SICAV Emerging Markets Frontier Blended Debt Fund.
It's a sub-fund of the Luxembourg-domiciled Ashmore SICAV UCITS Fund, which aims to maximise total returns by investing in transferable debt securities issued primarily by sovereign issuers within Frontier Emerging Markets.
The Fund will invest in hard currency, local currency debt and Foreign Exchange instruments.
The Fund offers investors the opportunity to capitalise on the attractive yields and improving credit stories offered by Frontier EM debt markets.
Ashmore highlighted further following features of the new fund:
• Attractive all-in yields: investors can hope to achieve higher returns due to the elevated risk premia associated with Frontier markets.
• Participation in improving credits and economic turnaround stories: the Fund allows investors to participate in the economic recovery and a net improvement in credit ratings within Frontier Markets.
• Low average duration: the shorter durations typically associated with Frontier debt offer reduced exposure to interest rate volatility.
• High carry opportunities in select local currency instruments: investors can benefit from the high yield available in local currency instruments within Frontier markets.
Alexis de Mones, portfolio manager at Ashmore Group, said: “Lower foreign investor participation in EM Frontier debt markets has led to an increase in borrowing costs across many of these markets, and this Fund provides investors with access to the high-yield opportunities that we are seeing as a result.
"Our extensive experience and deep relationships in these countries position us very well to capitalise on the attractive risk premia and economic turnaround stories that these markets offer.
"The hard and local currency Frontier markets offer very distinct returns profiles over different parts of the cycle, and this will provide us with opportunities to manage the fund actively and reduce the level of volatility.”
The landscape of Emerging Markets (EM) sovereign debt continues to evolve, with an increasing divergence between a narrow spectrum of high quality, high liquidity debt markets and a broader array of smaller markets, many of which are classified as 'Frontier' debt markets.
The financial pressure faced by many Frontier markets in the aftermath of the pandemic led to a loss of market access and a significant reduction in capital inflows from international private investors.
However, the increased involvement of the International Monetary Fund (IMF) has catalysed economic reforms, reduced imbalances and led to an overall improvement in sovereign credit ratings across the Frontier debt space.
Despite these positive developments, lower foreign investor participation still result in high borrowing costs in many of these markets, creating compelling investment opportunities with potential double-digit yields – the Fund’s yield to maturity is over 11% today.
With over 30 years of experience in managing EM debt, Ashmore said it was very well positioned to navigate the complexities of Frontier Markets, with a global footprint and ten local offices.
Ashmore already manages close to $3bn in Frontier debt assets across existing EM debt strategies, and has been managing a dedicated Frontier Equities strategy since 2010.
