The BNY Mellon Emerging Markets Corporate Debt Fund offers investors exposure to a diverse asset class, covering corporate debt and corporate debt-related instruments issued across emerging markets globally.
Fund Inception Date
31 January 2012
Why invest in this Fund?
1. A structural investment opportunity in EM corporate debt: The emerging market (EM) corporate debt market has grown to close to 2 trillion US dollars. The universe is diverse, with a rapidly growing number of issuers, and over 60% of outstanding debt is rated investment grade. Although the majority of issuance is in US dollars, market inefficiencies mean that yields are generally higher than for comparable developed market credits, presenting significant opportunity for alpha generation.
2. A systematic process, aiming to generate consistent outperformance: The Fund takes a total return approach, dynamically allocating across the EM corporate high yield and investment grade spectrum, with active management through the interest rate and credit cycle. Securities are selected utilising Insight’s rigorous credit research process, drawing upon fundamental country evaluation to focus on those companies underpinned by stable or improving economic conditions in their core business markets.
3. Rigorous approach to risk management: Insight has developed a proprietary risk framework specifically for its EM portfolios, with internal risk limits applied at both the individual country and the aggregate portfolio level. Mitigating top-down risk is a core aspect of Insight’s approach and the team generally avoids investing in countries with an economically regressive and deteriorating political outlook.
The rapid uptake of smartphones in emerging markets is an important consideration for investors. Not only has it revolutionised connectivity but it has unleashed open access to knowledge (through 24-hour news, for example) and to friction-free financial transactions.
For the right companies in the right sectors the growth opportunity is one of exposure to countries with very young, fast-growing and urbanised populations. At present these countries have low but rising mobile internet penetration rates.
For the investment team one such company is Helios Towers Africa, an owner and operator of telecommunications towers and passive infrastructure in four high-growth African markets.
One major trend associated with rising prosperity is a change in dietary preferences: as people become wealthier they tend to buy more protein-rich food such as meat and dairy.1
For the Emerging Market Corporate Debt strategy one response to this trend is to invest in globally significant agricultural exporters, such as Brazilian beef producer Marfrig.
For credit managers, emerging markets (EM) present a rich opportunity set. Because over half the corporate universe in EM is privately owned, investments in many companies have to be made via the credit market.
Insight Investment’s emerging market corporate debt (EMCD) team has forged long-standing relationships with three companies it anticipates will deliver stable, double-digit growth by taking full advantage of the exponential rise of data.
One such company, for instance, an operator of mobile telecommunications towers, is able to exploit two underpenetrated markets: broadband and mobile phones.
Colm McDonagh, Insight’s head of emerging market fixed income, says: “We’re seeing sub-Saharan Africa’s mobile phone usage moving from as low as 20% towards the 100% mark (where developed markets are). At the same time, we’re seeing an explosion in the use of data, so it’s a much bigger game.”
Sub-Saharan Africa has a younger, increasingly urban population with an inherent desire to be more connected, supporting a longer-growth trend, he notes. In the region, some 70% of the population is under the age of 30, while more than 22 million are expected to move to cities – almost four times that seen in the G7, McDonagh says.
In addition, adding to the growth outlook for such a business in Africa, is the rapid move in emerging markets towards a cashless society. McDonagh notes that unlike developed markets that may use Apple Pay or Google Pay for the occasional transaction, EM countries are moving more quickly as their whole infrastructure is built around mobile-first.
In moving straight into high data-intensive use, rather than evolving a legacy mainframe, or dial-up internet system as many in the developed world had to do, the types of apps being developed today will play directly into the hands of the companies serving this audience, he adds.
Investment Managers are appointed by BNY Mellon Investment Management EMEA Limited (BNYMIM EMEA) or affiliated fund operating companies to undertake portfolio management activities in relation to contracts for products and services entered into by clients with BNYMIM EMEA or the BNY Mellon funds.
1 World Health Organisation: ‘Global and regional food patterns and trends’, accessed 16 July 2018