Evli Emerging Markets Credit

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

NAV
02.07.2020
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
89.986 -1.35 0.32 0.49 1.40 2.09
NAV
02.07.2020
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
114.975 -1.35 0.32 0.49 1.40 2.09
NAV
02.07.2020
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
102.779 -1.13 0.77 0.91 - 0.88

Risk

3/7

Morningstar

3/5

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.

Invest

min. 1 000 € or 50 €/month

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.

 

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

31.05.2020

The strong recovery of the emerging market corporates continued for the second consecutive month in May. Markets rallied on the back of exceptionally strong monetary and fiscal stimulus done not only by western central banks and sovereigns, but emerging market peers as well. Market sentiment was exceptionally strong even though the coronavirus worries still remain and the actual effects of the pandemic will only be truly seen in the second quarter financial results.

The fund’s return was 5.28%, while the return of the benchmark index was 3.81%. In general, high yield investments were the best performers of the month and hence the overperformance of the fund compared to its benchmark. The fund overperformed its benchmark almost in all fronts geographically. Most of the overperformance in absolute terms came from oil and transportation sectors. At the end of the month, the fund’s duration was 5.45, which is slightly higher compared to the benchmark.

The following changes to the fund’s composition have been done during the pandemic crisis. Oil sector exposure has been increased while the fund was underweighting the sector before the crisis. Credit selection has been focusing on high yield names in the secondary market as well as investment grade companies in the primary. The fund’s duration has been increased moderately.

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