risks.

The following risks may be materially relevant but may not always be adequately captured by the summary risk indicator and may cause additional loss: Credit risk, Liquidity risk and Emerging market risk.

Asia Value Bond

A global hard currency fixed income approach to navigating the changing Asian credit landscape
 

Asia credit in hard currency is a bright spot within emerging-markets fixed income. It is a growth market offering strong fundamentals and attractive value relative to global markets.

1 Source: Bloomberg indices, JP Morgan indices, Lombard Odier. As at March 2022. 
* Target performance is an estimate of future performance based on current market conditions and are not an exact indicator. What you will get will vary depending on how the market performs and how long you keep the product.

investment case.

Asia has undergone tremendous structural reform in the past few decades. Beyond export-oriented growth, the region has seen increased economic diversification, greater government transparency and deepening capital markets. To sustain continued growth, many Asian enterprises are increasingly tapping USD-denominated debt markets. 

As a result, the region offers improving credit quality and increasingly diverse opportunities1. In our view, Asia debt can provide attractive credit opportunities relative to its developed markets peers, and better fundamentals compared with other emerging-world peers.
 


Source: LOIM; Bloomberg, 31 May 2023. For illustrative purposes only.

1 Source: Moody’s, JP Morgan, October 2018. There can be no assurance that the Sub-Fund’s investment objective will be achieved or that there will be a return on capital or that a substantial loss will not be incurred.

dynamic search for value.

Asia has the fundamentals for an attractive credit outlook: economic growth, improving fiscal balances and sustainable debt levels.

But an active approach can best harness and opportunities and avoid risks in the region's markets, in our view. Our Asia Value Bond strategy is built on three pillars:


For illustrative purposes only. 

our strategy.

Our Asia Value Bond strategy employs a high-conviction approach, seeking to generate both income and capital gains by investing in what the team considers to be the best opportunities in the Asia-Pacific region. 

The unconstrained investment process is dynamically managed across 11 bond sub-segments in a benchmark-agnostic manner to avoid the biases in indices and to uncover undervalued opportunities. This means the team enjoys the flexibility to go anywhere - within risk controls - actively targeting the best opportunities across countries, industries, seniority and maturities while accounting for varying market conditions. 

With a focus on fundamentals, the team carefully assesses the quality and risks of each investment while considering the top-down positioning and overall portfolio risk limits within a fully integrated sustainability framework. 

philosophy.

“We believe a high-conviction active management approach is best suited for the Asian credit markets where inefficiencies and dispersions can be ample over time, and where risks and opportunities are fluid. 

We select investments and build diversified portfolios based on a value-bias which, we believe, will allow us to capture long-term outperformance on our long-only total return strategies. Our relentless value-oriented fundamental top-down and bottom-up research further creates sustainable long-term advantages. We are benchmark-aware but not benchmark-driven.”
 

flexible investment approach.

Long-only total return
We aim to generate returns from income and capital gains. This means both capturing interest income over the longer term as well as applying highly active management in a bid to capture other sources of returns.
    
High conviction

By freeing ourselves from market-capitalisation based benchmark constraints, the portfolio is not tied to high concentrations of single countries or issuers that are more indebted. This allows us to invest with conviction in ongoing market opportunities and mitigate risks.
    
Value orientation

Asia Value Bond is focused on seeking value. Having a flexible approach allows the team to pursue what they believe are the most attractive opportunities across countries, sectors, issuers, seniority or maturity – at any given point of time.
 
The end result 

The result is a diversified portfolio of around 140 holdings with a typical credit rating of BBB-. Risk management is embedded in the portfolio-management process, with strict risk limits and natural hedges built in to reduce the impact of any sharp market movements.

sustainability integration.

Our investment process fully integrates sustainability analysis within each step of the investment process and sustainable opportunities across Asia-Pacific are actively pursued:
 

Corporate example: 
A leading clean-energy producer in India with strong shareholder support in the form of a large sovereign wealth fund investor as majority shareholder.
We invested in various bond issues from the company, expecting spreads to compress over time given its stable utilities profile.
 

Financials example: 
Senior and subordinate debt – banks, insurers, broker-dealers
A bank’s callable bond had a high coupon and was deemed an attractive technical investment. The team recognised there was a risk of excessive leverage to fuel acquisitions, while noting that another investor would potentially share any further financing burden.
 

Sovereigns example: 
Government and quasi-government debt
We invested in the longer-dated bond issue of a Chinese state-owned enterprise in the industrial sector. Our belief was the company could benefit from a potential future merger or an impending sovereign issue that would reprice this.

why us?

The strategy is managed by an experienced team, with diverse backgrounds whose track record goes back more than a decade. 

With a belief in being ‘local’ in Asia, the team is situated in Singapore, the latter growing as a leading global hub for Asia and global EM issuer meetings, including deal and non-deal roadshows. 

The local investment teams have deep knowledge of the Asian credit markets, as well as a strong network within the wider fixed income community, ratings agencies and bank syndicates. 

investment team.

LOcom_AuthorsAM-Dhiraj.png
Dhiraj Bajaj
Portfolio Manager & Head of Fixed Income Asia

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Nivedita Sunil 
Portfolio Manager

 

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Poh Xiongwei
Senior Credit Research Analyst

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Kenneth Kwan
Senior Credit Research Analyst

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Janvi Sanghvi
Credit Research Analyst 

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Benedict Liew
Fixed Income Product Specialist

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more about our funds.

Past performance is not a guarantee of future results. If the funds are denominated in a currency other than that in which the majority of the investor's assets are held, the investor should be aware that changes in rates of exchange may affect the value of the funds' underlying assets. The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.

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