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.

glossary.

Asia Diversified High-Yield

Income opportunities in a new era

In recent years, the Asian high-yield (HY) market has experienced a confluence of tail events which have disproportionately impacted assets. Yet, this market dislocation has also created potentially attractive valuations not seen in years for high-yield investors seeking an unconstrained and diversified approach.

6-10%

Average yields for Asian issuers
rated BBB, and crossover

8-12%

Average yields for
Asian BBs

8-9%

Average yields for global corporate
EM sub-IG universe

Source: LOIM, data of 30 September 2023. Credit ratings are subject to change and can vary over time. EM stands for emerging market. IG stands for investment grade. Past performance is not indiciative of future results. Yields are subject to change and can vary over time. For illustrative purposes only. ‘EM’ and ‘IG’ refer to Emerging Market and Investment Grade. Crossover refers to debt rated BBB to BB.

advantages of Asian high yield.

A new era of high income opportunities awaits Asian high-yield investors.

In addition to the region’s economic strength, the area offers several unique characteristics compared to its global peers:

A diverse fixed income universe, both geographic and sectoral, supported by growing issuance
Significant average yield opportunities in the region, excluding China:
- Asian BBBs/crossovers currently yield around 6-10% and BBs around 8-12% versus global corporate EM sub-IG universe at around 8-9%
A shorter duration profile that is less sensitive to changes in interest rates

drawbacks of a benchmark approach.

Benchmarks for Asian high yield can result in high concentration risk. For example:

The JACI HY universe has a very high single-country concentration (~60% in 2021), with China’s weighting at 31%
India, at 17%, is relatively under-represented considering it is the second largest Asian economy and expected to be the third largest global economy by 2030
The real-estate sector accounts for 23% of the universe (compared to ~45% in 2021), with China’s property sector representing around 60% of the sector

A benchmark-aligned approach presents significant geographical and sectoral risks.

Such constraints can lead to sub-optimal asset allocation and can expose benchmark-focused investors to default risk.

Source: JP Morgan as at 31 Dec 2022

why an unconstrained approach?

The Asian high-yield market has entered a new era – the universe is now cleaner and stronger. Active and risk-aware investors can construct more diversified and attractive portfolios by taking an unconstrained approach.

An unconstrained geographic focus can move beyond benchmarks to include the wider Asia-Pacific region, including Australia and Japan, as well as higher quality EM such as the Gulf Cooperation Council (GCC)
Sectoral exposure can be more diversified to encompass renewable energy, utilities and large-cap financials including subordinated capital bonds
Exposure to China can be minimal compared to market-cap weighted benchmarks
Ratings exposure can be focused on the most sustainable areas of the market – BB rated names and a large universe of crossover names

our strategy.

At Lombard Odier, our solution to the shortcomings of the Asian high-yield benchmark is a strategy that is: benchmark unconstrained, diversified and has structurally low exposure to China. This approach aims to capture significant upside potential in a defensive manner.

We employ a top-down macro, country and sector approach that is combined with strong bottom-up fundamental research. This results in a diversified and defensive Asian high-yield portfolio that reflects value in the current market environment. Moreover, our robust portfolio construction enables ample opportunities for the trading and recycling of capital to generate potentially strong total returns going forward.

Key characteristics:

key features.

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 both Hong Kong and Singapore, the latter growing as a leading global hub for Asian 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 traditional community, ratings agencies and bank syndicates.

Strong & Stable Investment Team

Focused local setup with global infrastructure support
Experienced local team with strong leadership
Strong management commitment

investment process.

Our investment process fully integrates ESG analysis without sacrificing alpha generation potential.

investment team.

Dhiraj Bajaj
Portfolio Manager & Head of Fixed Income Asia

Nivedita Sunil
Portfolio Manager


Poh Xiongwei Senior Credit Research Analyst


Kenneth Kwan Senior Credit Research Analyst


Janvi Sanghvi Credit Research Analyst


Benedict Liew Fixed Income Product Specialist

Teams are subject to change.

Find out more about our Asia Diversified High-Yield fund, including share classes.

more information

insights.

more insights

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important information.

This document is a Corporate Communication and is intended for Professional Investors only. This document is a Corporate Communication for Professional Investors only and is not a marketing communication related to a fund, an investment product or investment services in your country. This document is not intended to provide investment, tax, accounting, professional or legal advice. This document is issued by Lombard Odier Asset Management (Europe) Limited (hereinafter the “Company”).

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