Evli Emerging Markets Credit

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

NAV
18.08.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
78.314 -13.49 -14.64 -2.48 -1.45 0.70
NAV
18.08.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
106.364 -13.49 -14.64 -2.48 -1.45 0.70
NAV
18.08.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
95.997 -13.24 -14.26 -2.04 -1.02 -0.78

Risk

4/7

Morningstar

3/5

Recommended Investment Horizon

4 years or more

Administrative fees

1.00 % 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 and consideration of sustainability factors 

SFDR classification*: article 8, light green

The fund promotes sustainability factors as part of investment operations by integrating responsibility factors into investment analyses and by engaging with and excluding companies. Before an investment decision, the ESG analysis focuses on matters that are quantifiable through the quality of a corporate bond. Especially in company analysis, the fund focuses on the main ESG risks of each company. If a company has significant and unresolved ESG issues, the company becomes ineligible for investment. The analysis of ESG factors is based on portfolio managers’ holistic view of the company, which is based on information provided by the company, the portfolio managers’ own analysis and MSCI’s ESG data. The fund follows Evli’s general exclusion practices. The companies invested in by the fund are monitored for violations of UN Global Compact standards and the Climate Change Principles, and they are engaged with or excluded if violations are detected. The ESG indicators of the fund are reported in fund-specific ESG reports, which are updated four times a year. The fund’s benchmark index is a market-based index that does not consider sustainability risks or sustainability factors. The benchmark index used by the fund can be found in the fund-specific key investor information document.

*In accordance with the Sustainable Finance Disclosure Regulation (SFDR), Evli’s funds are classified into three categories with respect to sustainability factors: mainstream funds do not address sustainability factors, light green funds promote sustainability factors among other features, and dark green funds aim to make sustainable investments
 

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

31.07.2022

The emerging market corporate bond market experienced strong volatility in July. Credit spreads peaked around 30 basis points above their starting levels around mid-month, only to return to those levels at the end of the month. The US yield curve flattened, and the US 10-year yield fell around 35 bps. These moves were mostly driven by fears of a global recession and stagflation.

The fund’s return was -0.54%, while the return of the benchmark index was 0.88%. While falling US interest rates made the market return positive for the month, the fund was clearly lagging the market. The fund’s relative underweight in duration as well as credit overweight overall were the main reasons for the underperformance. Some individual investments were also under pressure. The fund benefitted from good selection in Brazilian investments and conversely underperformed in Argentinian investments.

Markets are experiencing strong volatility, which will likely continue at least in the short-term. Treasury yields will most likely continue to be a key driver in the short- to medium-term performance of the USD-denominated EM corporate bond market. The fund’s yield was 6.21% and duration 4.16.

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