SICAV

Emerging Markets Corporate Bond Fund

Accessing diversified emerging market corporate debt.

ISIN LU0596126465 Bloomberg TRPEMCI:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

4.74%
$212.6m

1YR Return
(View Total Returns)

Manager Tenure

3.71%
4yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.12
2.17%

Inception Date 18-May-2011

Performance figures calculated in USD

Other Literature

31-Aug-2020 - Samy Muaddi, Portfolio Manager,
The economic effects of the pandemic have weighed on corporate fundamentals in emerging markets, and some more fragile companies may remain impaired. However, most issuers should weather the storm and continue to gradually recover. Defaults should remain reasonably contained. We are still constructive on the asset class as its high carry should continue to attract investors amid record-low global yields. However, the risk-reward tradeoff is now more balanced as valuations have become more reasonable.
Samy Muaddi, CFA
Samy Muaddi, CFA, Portfolio Manager

Samy Muaddi is a portfolio manager in the International Fixed Income Division. He is the lead manager of the Emerging Markets Corporate Bond and Asia Credit Bond Strategies and co-manages the Emerging Markets Bond and Global High Income Bond Strategies. Samy also is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

Click for Manager Outlook
 

Strategy

Manager's Outlook

The March global sell-off in risk assets brought on by the coronavirus pandemic, an oil supply shock, and market illiquidity led to historically cheap valuations in emerging markets debt. While we believe a global slowdown and health care crisis will inevitably weigh on corporate fundamentals in emerging markets - and some of the more fragile companies are likely to remain impaired - most issuers should weather the storm and continue to gradually recover, with defaults remaining reasonably contained.

The second-quarter recovery in emerging markets corporate debt was consistent, with our early optimism surrounding stimulative economic policy that both developed and emerging markets enacted in response to the crisis. We are still constructive on the asset class, but the risk/reward trade-off is now more balanced as valuations have quickly become less extreme. However, the high carry provided by emerging markets corporate debt should continue to attract investors in an environment of record-low global yields.

Our current investment strategy is focused simultaneously on both survival and revival. We have eliminated the most vulnerable, distressed credits from the portfolio as default risk in the asset class has risen. We are more cautious on frontier markets, as valuations there have caught up more quickly. We are also holding slightly more cash than usual as future volatility may produce buying opportunities. At the same time, we have added to higher-quality names that are still offering generous spread in countries with strong fundamentals. We are also still finding attractive opportunities in Asia high yield.

We continue to see the best value in the BBB to BB credit rating segment of the market, and we maintain our underweight to the highest-quality and CCC and below areas of the market. As always, our process is centered around bottom-up, fundamental research and effective security selection. This approach will become increasingly important as the market environment becomes less beta-driven and fundamentals come back to the fore.

Investment Objective

To maximise the value of its shares through both growth in the value of, and income from, its investments. The fund invests mainly in a diversified portfolio of corporate bonds from emerging market issuers.

Investment Approach

  • Focus primarily on corporate debt issued by companies domiciled within emerging market countries.
  • Integrate proprietary credit research and relative value analysis.
  • Establish independent credit rating for each company and country.
  • Add value primarily through individual security selection decisions.
  • Limit risk through diversification.
  • Employ long-term investment horizon combined with low portfolio turnover.
  • Utilize collaboration across macroeconomic, equity and corporate debt teams to take a comprehensive view of corporate debt securities.
  • Diversification cannot assure a profit or protect against loss in a declining market.

Portfolio Construction

  • Diversified portfolio structure: typically 100-150 securities
  • Duration bands: managed within +/- 1 year of the benchmark
  • Expected average credit quality: BB
  • Maximum corporate issuer exposure of 3%
  • Country exposure will range between +/- 20% of index
  • Corporate sector exposure will range between +/- 20% of index
  • Expected tracking error will range between 250 - 450 bps

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Since Manager Inception
Annualised
Fund % 3.71% 4.74% 6.40% 5.33% 6.90%
Indicative Benchmark % 6.02% 5.02% 6.14% 5.40% 6.50%
Excess Return % -2.31% -0.28% 0.26% -0.07% 0.40%

Inception Date 18-May-2011

Manager Inception Date 30-Sep-2015

Indicative Benchmark: J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

Data as of  31-Aug-2020

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 1.30% 4.19% 5.16% 5.01%
Indicative Benchmark % 3.74% 4.52% 5.13% 5.13%
Excess Return % -2.44% -0.33% 0.03% -0.12%

Inception Date 18-May-2011

Indicative Benchmark: J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

Data as of  30-Jun-2020

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 18-Sep-2020 Quarter to DateData as of 18-Sep-2020 Year to DateData as of 18-Sep-2020 1 MonthData as of 31-Aug-2020 3 MonthsData as of 31-Aug-2020
Fund % 0.37% 4.16% 1.37% 1.31% 7.28%
Indicative Benchmark % 0.22% 3.47% 3.30% 0.90% 6.08%
Excess Return % 0.15% 0.69% -1.93% 0.41% 1.20%

Inception Date 18-May-2011

Indicative Benchmark: J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

Indicative Benchmark: J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

Performance figures calculated in USD

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

31-Aug-2020 - Samy Muaddi, Portfolio Manager,
Emerging markets corporate debt generated positive returns in August, supported by encouraging corporate earnings reports, optimism surrounding the development of a vaccine, and changes to the U.S. Federal Reserve’s inflation targeting strategy that spurred investors to increase their appetite for risk. Within the portfolio, our positioning within the oil and gas sector was beneficial as our selection of higher-yielding credits performed well. Argentinian oil producer YPF rebounded amid improved investor sentiment toward Argentina as the government came to terms with creditors on a restructuring. Avoiding defaulted Nostrum Oil and Gas added further to results. Our underweight allocation to the generally longer-duration sector was also helpful as longer-maturity yields increased. Within financials, our selection of higher-yielding Latin American banks helped relative results. However, our selections within the metals and mining sector held back relative results due to our more conservative holdings. Select lower-quality miners surged as demand for yield increased. Our selection of high-quality Codelco underperformed.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 13.47% Was (31-Jul-2020) 14.50%
Other View Top 10 Issuers

Monthly data as of 31-Aug-2020

Holdings

Total
Holdings
174
Largest Holding Globo Comunicacao E Participacoes 1.53% Was (31-Mar-2020) 1.71%
Top 10 Holdings 12.37%
Other View Full Holdings Quarterly data as of 30-Jun-2020

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating BB A
By % 15.25% -15.64%
Fund 34.36% 4.17%
Indicative Benchmark 19.10% 19.81%

Average Credit Quality

BB

Monthly Data as of 31-Aug-2020
Indicative Benchmark:  J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

Sources for Credit Quality Diversification: Moody's Investors Service and Standard & Poor's (S&P) split ratings (i.e. BB/B and B/CCC) are assigned when the Moody's and S&P ratings differ. Short-Term holdings are not rated.

Maturity View maturity analysis

  Largest Overweight Largest Underweight
Maturity Cash Equivalents 1-3 Years
By % 4.26% -6.33%
Fund 4.26% 16.40%
Indicative Benchmark 0.00% 22.73%

Weighted Average Maturity

7.43 Years

Monthly Data as of 31-Aug-2020
Indicative Benchmark:  J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

Duration View duration analysis

  Largest Overweight Largest Underweight
Duration 7-10 Years 1-3 Years
By % 7.17% -10.64%
Fund 18.24% 15.14%
Indicative Benchmark 11.07% 25.78%

Weighted Average Duration

5.69 Years

Monthly Data as of 31-Aug-2020
Indicative Benchmark:  J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

30-Jun-2020 - Samy Muaddi, Portfolio Manager,

Overweight Domestically Oriented Sectors

The technology, media, and telecommunications sector remained the portfolio's largest overweight. We initiated a new position in Lenovo and added to Tower Bersama.

We added to utilities holdings in companies that offered attractive risk-adjusted value following recent market volatility, making it a significant overweight. We added to higher-quality ACWA and Cometa. We also added to higher-yielding Mong Duong.

We reduced our overweight allocation to the real estate sector. We trimmed holdings in lower-rated Theta Capital and China Evergrande following recent recovery.

Underweight Lower-Yielding and Less-Attractive Risk-Adjusted Relative Value

The financials sector remains the largest underweight, and we further reduced financial holdings during the quarter. We trimmed holdings in Brazilian banks, such as Banco Pactual, Itau, and Banco do Brasil. As Brazil experiences political uncertainty, we sought better risk-adjusted value elsewhere.

We remain underweight the oil and gas sector but added following March's sell-off. The portfolio remains focused on quasi-sovereigns, adding to YPF and Saudi Arabian Oil.

We added to the metals and mining sector but are underweight. We added to high quality Codelco and PT Adaro.

Credit Quality Considerations

From a secular perspective, we find the most value in BBB and BB credits. These segments generally offer opportunities to identify companies with improving fundamentals that are rating upgrade candidates or provide a stable and attractive risk-adjusted yield.

We increased our holdings of BBB rated names that offer attractive risk-adjusted value, such as Indonesia Asahan Aluminium via new issue. The Indonesian mining company is state-owned. A portion of the proceeds from the new issue will be used to finance a tender offer. We also added to split-rated Latin American financials, such as Banco de Bogota and BBVA Bancomer on improved relative value. We continue to generally avoid distressed issuers in the CCC and below segment given their increased volatility, history of poor risk-adjusted returns and elevated default risk in the current environment.

Sectors

Total
Sectors
15
Largest Sector TMT 18.77% Was (31-Jul-2020) 20.46%
Other View complete Sector Diversification

Monthly Data as of 31-Aug-2020

Indicative Benchmark: J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

Largest Overweight

TMT
By8.12%
Fund 18.77%
Indicative Benchmark 10.65%

Largest Underweight

Financial
By-16.33%
Fund 14.19%
Indicative Benchmark 30.51%

Monthly Data as of 31-Aug-2020

31-Aug-2020 - Samy Muaddi, Portfolio Manager,
We focus on companies that we believe are well positioned to benefit from domestic economic growth, such as those in real estate and consumer-related sectors. In contrast, we continue to have a lower exposure to financials given rich valuations in some areas and poor transparency. We also maintain a significant underweight exposure to the oil and gas sector.

Countries

Total
Countries
39
Largest Country China 15.92% Was (31-Jul-2020) 16.36%
Other View complete Country Diversification

Monthly Data as of 31-Aug-2020

Indicative Benchmark: J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

Largest Overweight

China
By7.82%
Fund 15.92%
Indicative Benchmark 8.09%

Largest Underweight

Hong Kong
By-3.91%
Fund 0.87%
Indicative Benchmark 4.78%

Monthly Data as of 31-Aug-2020

31-Dec-2016 - Samy Muaddi, Portfolio Manager,
Countries with strong reform agendas including Brazil, Argentina, and Indonesia, remain a key focus of the strategy. On the other hand, we have trimmed our exposure to Mexico, largely through longer-maturity industrials, given the uncertainties around the potential renegotiation of North American free trade agreements

Currency

Total
Currencies
2
Largest Currency U.S. dollar 99.98% Was (31-Jul-2020) 99.98%
Other View complete Currency Diversification

Monthly Data as of 31-Aug-2020

Indicative Benchmark : J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

Largest Overweight

euro
By 0.02%
Fund 0.02%
Indicative Benchmark 0.00%

Largest Underweight

U.S. dollar
By -0.02%
Fund 99.98%
Indicative Benchmark 100.00%

Monthly Data as of 31-Aug-2020

Team (As of 05-Aug-2020)

Samy Muaddi, CFA

Samy Muaddi is a portfolio manager in the International Fixed Income Division. He is the lead manager of the Emerging Markets Corporate Bond and Asia Credit Bond Strategies and co-manages the Emerging Markets Bond and Global High Income Bond Strategies. Samy also is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

Samy’s investment experience began in 2006 when he joined T. Rowe Price, beginning as an associate analyst in the Fixed Income Division. After that, he was a credit analyst and then an associate portfolio manager on the Emerging Markets team before assuming his current role.

Samy earned a B.A., summa cum laude, in economics from the University of Maryland. He also has earned the Chartered Financial Analyst® designation. Samy is an adjunct professor at Georgetown University in the Walsh Graduate School of Foreign Service.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

  • Fund manager
    since
    2015
  • Years at
    T. Rowe Price
    14
  • Years investment
    experience
    14

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $1,000 $100 $100 5.00% 135 basis points 1.52%
Class I $2,500,000 $100,000 $0 0.00% 70 basis points 0.80%
Class Q $1,000 $100 $100 0.00% 70 basis points 0.87%
Class Sd $10,000,000 $0 $0 0.00% 0 basis points 0.10%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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