EMERGING MARKET DEBT

Daniel Moreno

Head of Emerging Market Debt

October 2018

2

Source: PwC

P R O J E C T E D R E A L G D P G R O W T H 2 0 1 6 - 2 0 5 0

Source: PWC

2016 2050

China 1 1 China

US 2 2 India

India 3 3 US

Japan 4 4 Indonesia

Germany 5 5 Brazil

Russia 6 6 Russia

Brazil 7 7 Mexico

Indonesia 8 8 Japan

UK 9 9 Germany

France 10 10 UK

E7 Economies G7 Economies

0% 20% 40% 60% 80% 100%

2050

2016Rest of the

World

Share of world GBP at PPP’s

E7G7

E M E R G I N G M A R K E T S W I L L D O M I N A T E T H E

W O R L D ’ S T O P 1 0 E C O N O M I E S I N 2 0 5 0

( G D P A T P P P S )

P R O J E C T E D C H A N G E I N S H A R E S O F W O R L D G D P F R O M 2 0 1 6 T O

2 0 5 0

G7 E7Rest of the

World

3

42%

58%

0%

10%

20%

30%

40%

50%

60%

70%

0

20

40

60

80

100

120

140

160

Developed Markets EM

Total Debt Share of GDP

Source: Ashmore, Bloomberg, World Bank, IMF, Bank of Merrill Lynch

*Source: Asset Management Survey 2016/17

On average only 0.4% allocated to Emerging Market Bonds *

US

D (

Trilli

on

s)

Pe

rce

nta

ge

of W

orld

GD

P (P

PP

-ad

juste

d)

4

Emerging markets contribute to 58% of total global growth

5Source: Ashmore, BIS, IMF, Bloomberg

6

USD trillion 2002 2007 2012 2017 2017

Local Currency 1.8 6.1 12.3 21.1 87%

Government 1.0 3.3 6.2 10.3 42%

Corporate 0.4 0.7 2.5 4.3 18%

Financial 0.5 2.1 3.7 6.6 27%

Hard Currency 1.6 3.2 1.9 3.2 13%

Government 1.3 2.7 0.8 1.2 5%

Corporate 0.4 0.5 0.5 0.8 3%

Financial 0.7 1.2 5%

EM Fixed Income 2.6 7.4 14.3 24.3 100%

Source: Ashmore, Bloomberg, World Bank, IMF, BAML

*Source: Asset Management Survey 2016/17

7

Source: Bloomberg

0

200

400

600

800

1000

1200

1400

Composite IG HY

Ha

rd C

urre

nc

y S

ove

reig

n

8

E X A M P L E : H A R D C U R R E N C Y B E N C H M A R K I S I N C R E A S I N G L Y D E P E N D E N T O N D U R A T I O N T O G E N E R A T E R E T U R N S

Source: Mirabaud Asset Management and Bloomberg as of 31/8/2018

Ha

rd C

urre

nc

y S

ove

reig

n

3

3,5

4

4,5

5

5,5

6

6,5

7

7,5

8

2

4

6

8

10

12

14

16

18

Yield Duration (RHS)

9

Currency Bonds Bonds and Currency

Source: JP Morgan GBI-EM GD, as of 31/8/2018

Currency

Bonds

Bonds and

Currency

0

50

100

150

200

250

300

350

400

Lo

ca

l Cu

rren

cy S

ove

reig

n

10

Source: Bloomberg

70

700

Brent DXY EMFX

-5.5%

+219%

+332%

Lo

ca

l Cu

rren

cy S

ove

reig

n

11

L O C A L C U R R E N C Y H I G H L Y C O R R E L A T E D T O E U R / U S D

Source: Mirabaud Asset Management and Bloomberg as of 31/8/2018

Taper tantrum

0,9

1

1,1

1,2

1,3

1,4

1,5

1,6

1,7

0

50

100

150

200

250

300

350

GBI-EM EUR/USD

Lo

ca

l Cu

rren

cy S

ove

reig

n

12

Source: BAML

Ha

rd C

urre

nc

y C

orp

ora

te

13

I N D E X T Y P E B E N E F I T S R I S K S H O W W E T A C K L E

R I S K / I N E F F I C I E N C I E S

H A R D C U R R E N C Y

S O V E R E I G N

D I V E R S I F I C A T I O N D U R A T I O N / L I Q U I D I T Y A C T I V E L Y M A N A G E D

L O C A L C U R R E N C Y

S O V E R E I G N

H I G H E R Y I E L D S V O L A T I L I T Y A C T I V E M A N A G E M E N T /

O N G O I N G R E P O S I T I O N I N G

H A R D C U R R E N C Y

C O R P O R A T E

H I G H E R C R E D I T

Q U A L I T Y

L O W E R R E T U R N S F U N D A M E N T A L A N A L Y S I S O F

C R E D I T / S T R O N G R I S K

M A N A G E M E N T

Passive/index investing expose investors to unwanted risks and reduced benefits of the asset class.

An unconstrained actively managed risk adjusted approach:

• Maximises long-term returns

• Avoids unnecessary risks and over-concentration

• Adapts to the changing nature of Emerging Markets

Up to 40% in

Local

Currency and

Credit

Investing in local and hard currency bonds

to maximise liquidity and opportunity

36% in Local

Currency

Bonds

P A R A M E T E R S P O S I T I O N

Up to 30% in

Corporate

Bonds

Invest outside of the benchmark for

additional tactical opportunities

30% in

Corporate

Bonds

Source: Bloomberg and Mirabaud Asset Management, as of 31/8/2018

Up to 20% in

Frontier

Markets

Invest in new markets in order to enhance

returns and reduce correlation20% in

Frontier

Markets

Currency overlay: Free float up to 20%, max 10% in each established EM currency

and 5% remaining currencies

13

Active flexibility is required to exploit emerging market debt opportunities

BB Average Credit Rating

Latin America 35%

Eastern Europe 19%

Africa/Middle

East 30%

Asia Pacific 7%

Central Asia 5%

Cash and Other

Assets/Liabilities 4%

YTM:

9.42%

Duration

3.90 yrs Top countries

Mexico 7.20%

Russia 6.28%

Brazil 6.22%

Nigeria 5.53%

Turkey 5.36%

Source: Bloomberg and Mirabaud Asset Management, as of 31/8/201815

Category

BRICS 18%

MINT 21%

Other 34%

Frontier 20%

Quasi-Sovereign 16%

Sovereign 22%

Treasury 22%

Financials 14%

Supranational 4%

Cash and Other

Assets/Liabilities 4%

Source: Bloomberg and Mirabaud Asset Management, as of 31/8/201816

Corporate 18%

Hard vs local

Hard Cny 64%

Local Cny 36%

B A L A N C I N G C U R R E N C Y, C R E D I T A N D D U R A T I O N

0

2

4

6

8

10

12

0 1 2 3 4 5 6 7

Corporate HC

Duration (Years)

Yield (%)

Mirabaud – Global Emerging Market Bond Fund

Sovereign LC Sovereign HCUS High Yield

US Treasuries

Source: Bloomberg as of 31/8/2018

HC=Hard Currency, LC=Local Currency

17

85

90

95

100

105

110

115

120

125

130

01/01/2015 01/05/2015 01/09/2015 01/01/2016 01/05/2016 01/09/2016 01/01/2017 01/05/2017 01/09/2017 01/01/2018 01/05/2018 01/09/2018

Composite 50/50

18

Source: Bloomberg as of 31/8/2018. EM Composite: until 30.10.2017 Rubrics Emerging Markets Fund, from

01.11.2017 Mirabaud – Global Emerging Market Bond Fund. 50/50: JP MORGAN EMBIGD & GBI-EM GD

+18%

+8%

Start of Mirabaud – Emerging

Market Bond Fund

19

Objectives

Fund Objective An emerging market strategic bond fund targeting attractive risk adjusted returns across the business cycle by adopting

an unconstrained approach to investing in global emerging market sovereign and corporate debt in both hard and local

currencies.

Secondary Investment Objective Lower volatility and superior capital preservation versus peers

Investment Style Total return, unconstrained fixed income investing

Investment Universe Emerging Market Sovereign and Corporate Debt in Hard and Local Currencies

Number of Issuers Approx. 100

Investment Guidelines

Hard Ccy Exposure

Local Ccy Exposure (unhedged)

Corporate Debt Exposure (IG or HY)

Maximum holding

0% - 100%

0% - 40%

0% - 30%

2.5% per issuer

Limit on Frontier Markets 20%

Limit on Currency Exposure 10% for established emerging market currencies, 5% for less liquid frontier currency

VaR Range 3%-6%

Fund Launch 1st November 2017

M I R A B A U D – G L O B A L E M E R G I N G M A R K E T B O N D F U N D

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