Skandia Investment Group’s new twist to emerging market debt offers potential for long term currency boost

Skandia Investment Group (SIG) has launched a local currency emerging market debt fund in order to take advantage of the longer term prospects for emerging market currencies as well as their bonds.
The mandate for the new fund has been won by US based institutional fixed-income investment specialist Stone Harbor Investment Partners. Stone Harbor (Institutional Investor magazine’s Fixed Income Manager of the year) first found favour with SIG back in September 2008 when it was awarded a $60m mandate to run the Skandia Emerging Market Debt fund. That fund has since growth to just under $500m.
With that fund producing a 39% net of fees return against a benchmark return of 35%* since Stone Harbor took over, the firm was in pole position to take on SIG’s new mandate, particularly given their capability in emerging market currencies.
SIG Fixed Interest expert Anthony Gillham said that the rationale for the new fund was three fold in that EMD was a good way to capture global growth with emerging markets having good relative yields; that local currencies were still undervalued and that local currency EMD was an established market – some three times the size of the US dollar EMD market.
“Given low government bond yields and the fiscal challenges currently facing western governments, we believe that emerging market government bonds are set to outperform. We also believe that they are likely to continue to outstrip those of developed economies as we see their currencies appreciate over time.
“The team at Stone Harbor, who we have selected to run our new fund, are amongst the most experienced and highly regarded in the asset class and have a track record that is second to none. As investment managers of our existing US Dollar emerging market debt product, we hope to further develop our highly successful relationship and continue to deliver exceptional investment performance for our clients.”
SIG is rolling out the new Skandia Local Currency emerging Market Debt Fund to the UK discretionary market. Over the coming weeks SIG, which is seeking permissions from local regulator, intends to roll out the new fund through a number of countries across its global distribution network.
*Net of fees, data from end Sep 08 to end Dec 10 sourced from Factset