Evli Emerging Markets Credit

Long-term fixed income fund that invests in the emerging markets with both low and high credit ratings

NAV
25.02.2021
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
96.423 0.06 3.42 2.99 3.43 2.87
NAV
25.02.2021
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
123.199 0.06 3.42 2.99 3.43 2.87
NAV
25.02.2021
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
110.454 0.13 3.89 3.45 - 2.67

Risk

4/7

Morningstar

2/5

Recommended Investment Horizon

4 years or more

Administrative fees

1 % p.a.

Suitable for investors

  • who wish to benefit from the growth potential of the emerging economies
  • who wish to diversify their investments into corporate bond markets with returns higher than those of government bonds
  • who want to invest responsibly and take into account not only economic analysis but also environmental, social and good governance (ESG) factors.

Invest

min. 1 000 € or 50 €/month

Investment Policy

Evli Emerging Markets Credit Fund is a corporate bond fund that invests in bonds primarily denominated in US dollars or euros and issued by companies or financial institutions that operate in the emerging markets. The investments will be made in bonds with both higher (Investment Grade) and lower (High Yield) credit ratings. The average credit rating of the fund will be at least B- or a classification with a corresponding risk level.

The fund’s geographical investment area covers the emerging markets in Asia, Africa, Eastern Europe, the Middle East and Latin America. The fund hedges the currency risk associated with non-eurodenominated investments.

Responsibility

ESG factors are integrated into the fund’s investment decisions, and the fund follows Evli's general exclusion practices. The fund’s investments are monitored for violations of UN Global Compact norms and the Climate Change Principles, and the fund engages with the companies they invest in or exclude them if violations are detected. The fund's ESG indicators are reported in a fund-specific ESG report, which is updated four times a year.

Read more about Evli's responsible investing

 

The portfolio is managed by

Juha Mäntykorpi

Investment Objective and Risks

The aim is to achieve a return that, in the long term, exceeds the benchmark return. The expected return and risk of the fund are higher than those of a fund that invests solely in developed markets government bonds.

The average duration of the fund's fixed income investments is typically 3-7 years.

The fund’s investments carry a credit risk

Credit risk originates from a bond issuer’s ability to repay the bond’s coupons and capital on the maturity date. In the fund’s investments, the default risk arising from an individual issuer is reduced by diversifying the investments among various issuers. The risk premium (credit spread) required by investors varies during the bonds’ time outstanding according to the market conditions and factors related to individual issuers. As the credit risk grows, the values of the bonds in the portfolio decrease and vice versa. Poorer credit-rated High Yield bonds, in particular, carry a significant credit risk.

The fund’s value is affected by interest rate risk

A decrease in interest rates raises the value of the fund, while an increase reduces the value of the fund. Interest rate risk may be measured with the average time remaining until maturity (duration). Interest rate risk indicates how sensitive the value of the fund is to changes in interest rates. Long-term fixed income funds are much more sensitive to interest rate movements than money market funds. The value of the fund may fluctuate heavily if there are substantial changes in interest rates.

Monthly review

31.01.2021

In January, the theme of the month in emerging market corporate bonds was volatility in US Treasury yields. Corporate credit spreads, in turn, developed sideways. Overall market sentiment was highly positive despite the prevailing pandemic. In particular, primary market activity during the month was strong in EM corporate bonds.

The fund’s return was 0.05%, while the return of the benchmark index was -0.14%. The negative return of the overall market was due to the increase in US Treasury yields. Therefore, investment grade companies were clear underperformers while having longer durations. The fund gained most of its overperformance from an underweight in duration/IG companies, as well as from company selection on several fronts. Conversely, some relative underperformance was caused by smaller exposures to higher risk countries (e.g. Turkey and Oman).

Despite some anxiety in overall global capital markets, EM corporates still seem to cope relatively well. Treasury yields will be a key factor in the short-term performance of this USD-denominated asset class. The USD/EUR-hedging cost remains at relatively low levels making the yield still tempting for European investors.

The fund’s yield was 3.32% and duration 4.66.

Fund facts

Type of fund Corporate bond fund investing in emerging markets (UCITS)
Investment activity began 10.10.2013
Benchmark index J.P Morgan CEMBI Broad Diversified EUR-hedged
Profit distribution Fund-units are divided into A and B units. Profit share of at least 3% is distributed on A units annually.

Downloadable files

Invest

min. 1 000 € or 50 €/month