GLOBAL - Recent rallies in global equity markets did not dampen investor enthusiasm for emerging market bonds, according to new data from EmergingPortfolio.com Fund Research (EPFR).
New money into dedicated emerging market bond funds reached record levels for the weekending May 7, hitting US$255.4m. This brings the amount of fresh commitments this year to US$1.8bn .
Led by near 40% returns of Brazilian sovereign bonds so far this year, emerging market bond funds have yielded an average 14% year to date.
“Investor optimism has been supported by progress with pension and tax reform in Brazil and continuing signs of fiscal austerity being exercised by the new government, and by the US Federal Reserve’s comments this week showing renewed concerns about deflation, suggesting that the bias is towards easing rather than tightening,” says Brad Durham, a managing director of EPFR.
And one of the emerging market bond funds receiving substantial inflows for the week was the Guernsey-registered Ashmore Emerging Markets Liquid Investment Portfolio, exceeded US$1bn in net assets for the first time.
The fund was launched in 1992 with US$18m and has since returned an annualised 20.03% net of all fees. Investors are predominantly institutional.
Jerome Booth, head of research, Ashmore Investment Management, said: “Our macro focus and combination of attention to both value and liquidity has added consistently high levels of alpha, but EMLIP has always been managed in a way that minimises excessive risk whilst retaining a focus on value over the cycle.
“This has differentiated us on the one hand from more aggressive competitors, and on the other hand from those who have lost their nerve and cut losses in bear markets, and in so doing foregone the following recovery upside. “
EPFR also showed that both international bond funds and emerging market equity funds received positive inflows in the most recent week, attracting US$258.5m and US$60.6m respectively. For emerging equity, this reduced total outflows for the year to US$244.8m.
GEM funds shifted to Latin America at the expense of Asia Pacific. Brazil overtook Mexico and Korea was underweight being closed out. Flows were also positive into the emerging Europe, the Middle East and Africa.
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