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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)

6.00%
$145.1m

1YR Return
(View Total Returns)

Manager Tenure

13.14%
4yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.31
1.20%

Inception Date 18-May-2011

Performance figures calculated in USD

Other Literature

31-Oct-2019 - Samy Muaddi, Portfolio Manager,
We remain cautiously optimistic given supportive corporate fundamentals, the high carry profile of the asset class, and the persistent global bid for yield. The relatively defensive nature of the asset class is also positive. That said, emerging markets corporate debt is not insulated from exogenous risk factors, highlighting the importance of bottom-up credit selection.
Samy Muaddi
Samy Muaddi, Portfolio Manager

Samy Muaddi is a portfolio manager in the Fixed Income Division of T. Rowe Price. Mr. Muaddi is the lead manager and executive vice president of the Emerging Markets Corporate Bond and Multi-Sector Account Strategies and chairman of the strategies' Investment Advisory Committees. He also manages the Asia Credit Strategy and is co-portfolio manager of the Global High Income Strategy. Mr. Muaddi is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

Click for Manager Outlook
 

Strategy

Manager's Outlook

After a strong rebound in the first quarter of the year, uncertainty has weighed on markets and driven up volatility. Slowing global growth and the U.S.-China trade war have remained headwinds, though accommodative monetary policy globally and the increasing stock of negative-yielding debt in developed markets have been supportive for EM debt.

EM corporate bonds have performed well year-to-date after a modest 2% decline in 2018. Although returns slightly lagged higher-beta assets such as U.S. high yield, EM sovereign debt, and EM equity in the first half of the year, EM corporate bonds outperformed these asset classes in the third quarter as volatility picked up, and risk appetite waned. This was due in part to the asset class's higher credit quality, U.S. dollar denomination, and bias toward the more defensive Asia region.

Going forward, the biggest exogenous risk for the asset class is a global economic environment characterized by tighter monetary policy. Should the current global easing cycle prove to be short lived, its end may expose vulnerabilities in economies that have overly relied on the abundant supply of cheap money in the post-GFC era. The decreasing willingness and ability of China to stimulate to a degree that is supportive of the global economy, broadly, in addition to its own economy is a key component of this risk.

Despite exogenous macro risks, the long-term outlook for EM corporate debt remains broadly supportive, underpinned by healthy balance sheets, a stable economic growth premium over development markets, rising middle class wealth, improved corporate governance, limited external vulnerabilities, and rational policy regimes in most countries. As evidence, the EM corporate default rate is at historical lows.

Endogenous factors are largely positive, yet we remain somewhat cautious in the face of increased global uncertainty and have been taking profits in some of our higher-beta positions and reallocating capital to more defensive areas of the market. Early in the quarter, we further reduced allocations in Turkey and Argentina and took down some exposure to China and Indonesia. We added to higher-quality markets such as South Korea and the GCC states. On a sector basis, we rotated some real estate exposure into the more defensive financials and utilities sectors. We remain focused on countries with positive reform momentum, such as Brazil and South Africa.

Our overall outlook remains cautiously optimistic given supportive corporate fundamentals, the high carry profile of the asset class, the persistent global bid for yield, and the relatively defensive nature of the asset class. That said, EM corporate debt is not insulated from exogenous risk factors, highlighting the importance of bottom-up credit selection.

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 % 13.14% 6.00% 5.57% 5.59% 7.77%
Indicative Benchmark % 12.20% 5.35% 5.20% 5.40% 6.73%
Excess Return % 0.94% 0.65% 0.37% 0.19% 1.04%

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-Oct-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 11.17% 5.70% 5.55% 5.55%
Indicative Benchmark % 10.59% 5.05% 5.21% 5.35%
Excess Return % 0.58% 0.65% 0.34% 0.20%

Inception Date 18-May-2011

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

Data as of  30-Sep-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 15-Nov-2019 Quarter to DateData as of 15-Nov-2019 Year to DateData as of 15-Nov-2019 1 MonthData as of 31-Oct-2019 3 MonthsData as of 31-Oct-2019
Fund % 0.00% 0.76% 12.18% 0.76% 1.41%
Indicative Benchmark % 0.01% 0.86% 11.59% 0.85% 1.61%
Excess Return % -0.01% -0.10% 0.59% -0.09% -0.20%

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-Oct-2019 - Samy Muaddi, Portfolio Manager,
Emerging markets corporate debt generated positive returns in October. Concerns about potential weakness in global growth stemming from trade disputes and increased geopolitical tensions remained, yet investors sought higher yields amid low global rates. Within the portfolio, our selection of high-quality Chilean utilities underperformed amid anti-government protests in the country. Investment-grade Enel and Enersis Americas declined. Similarly, our selection within consumers weighed on relative returns. Our underweight exposure to generic pharmaceutical manufacturer Teva held back performance when it rallied following an announced settlement in the global opioid crisis. In contrast, our positioning within the oil and gas sector aided relative returns, supported by our underweight allocation and selection of state-supported oil producers, such as Petroleos Mexicanos, KazMunayGas, and Petrobras. Within financials, our selection of higher-yielding Latin American banks Banco Pactual, BBVA Bancomer, and Banco do Brasil outperformed.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 14.08% Was (30-Sep-2019) 13.66%
Other View Top 10 Issuers

Monthly data as of 31-Oct-2019

Holdings

Total
Holdings
158
Largest Holding Globo Comunicacao E Participacoes 1.77% Was (30-Jun-2019) 1.51%
Top 10 Holdings 13.21%
Other View Full Holdings Quarterly data as of 30-Sep-2019

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating BB A
By % 13.61% -13.55%
Fund 33.11% 5.18%
Indicative Benchmark 19.50% 18.73%

Average Credit Quality

BB

Monthly Data as of 31-Oct-2019
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 5-7 Years 10+ Years
By % 5.49% -7.41%
Fund 22.96% 8.34%
Indicative Benchmark 17.47% 15.75%

Weighted Average Maturity

6.91 Years

Monthly Data as of 31-Oct-2019
Indicative Benchmark:  J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

Duration View duration analysis

  Largest Overweight Largest Underweight
Duration 5-7 Years 1-3 Years
By % 11.64% -4.93%
Fund 30.72% 21.14%
Indicative Benchmark 19.08% 26.07%

Weighted Average Duration

5.38 Years

Monthly Data as of 31-Oct-2019
Indicative Benchmark:  J.P. Morgan Corporate Emerging Market Bond Index Broad Diversified

30-Sep-2019 - Samy Muaddi, Portfolio Manager,

Domestic Demand Could Drive Opportunities for Growth

The technology, media, and telecommunications sector remained the portfolio's largest overweight. We participated in a new issue by investment-grade South Korean electronic component producer Hynix and added to high-quality Entel.

We remain overweight transportation and added to this sector. We initiated a new position in Ukraine Rail and added to Emirates Airlines. These higher-yielding corporates benefit from state support in countries with improving fundamentals.

We reduced holdings in the real estate sector. Following an extended period of healthy returns, we eliminated lower-quality Asian property developers, such as PCPD Capital, Evergrande, and Jababeka.

We increased our allocation to utilities and are now significantly overweight the sector. We initiated new positions in Asian utilities Mong Duong and China Oil and Gas.

We added to the portfolio's overweight allocation to the industrial sector. We initiated a position in Thai PET producer Indorama on a new issue.

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

The financials sector remains the largest underweight, though we added to financial holdings during the quarter. We initiated a position in high-quality Thai bank Bangkok Bank and added to existing positions in Latin American Banco PTG Pactual.

Though we maintained our underweight allocation to the oil and gas sector, we added to holdings. The portfolio remains focused on quasi-sovereigns, adding to state-owned Petroleos Mexicanos and Ecopetrol.

The metals and mining sector remains a meaningful underweight, and we further reduced our allocation to the sector. We reduced holdings of JSW Steel, as Indian steel markets could face near-term headwinds amid slowing domestic demand and international pricing pressures. We captured recent gains and reduced aluminum producer Press Metal and Asahan Aluminium.

Credit Quality Considerations

From a secular perspective, we find the most value in BBB, BB, and B 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 Mexican bank BBVA Bancomer. We continue to generally avoid distressed issuers in the CCC and below segment given their increased volatility and history of poor risk-adjusted returns.

Sectors

Total
Sectors
14
Largest Sector TMT 19.99% Was (30-Sep-2019) 18.15%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2019

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

Largest Overweight

TMT
By7.97%
Fund 19.99%
Indicative Benchmark 12.02%

Largest Underweight

Financial
By-14.25%
Fund 15.55%
Indicative Benchmark 29.80%

Monthly Data as of 31-Oct-2019

31-Oct-2019 - 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 in the portfolio, given rich valuations in some areas and poor transparency. We also maintain underweight allocations to extractive industries, such as the oil and gas sector.

Countries

Total
Countries
40
Largest Country China 13.28% Was (30-Sep-2019) 12.57%
Other View complete Country Diversification

Monthly Data as of 31-Oct-2019

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

Largest Overweight

South Africa
By5.29%
Fund 7.73%
Indicative Benchmark 2.44%

Largest Underweight

Qatar
By-3.14%
Fund 0.00%
Indicative Benchmark 3.14%

Monthly Data as of 31-Oct-2019

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
3
Largest Currency U.S. dollar 100.00% Was (30-Sep-2019) 100.00%
Other View complete Currency Diversification

Monthly Data as of 31-Oct-2019

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

Largest Overweight

Canadian dollar
By 0.00%
Fund 0.00%
Indicative Benchmark 0.00%

Largest Underweight

U.S. dollar
By -0.00%
Fund 100.00%
Indicative Benchmark 100.00%

Monthly Data as of 31-Oct-2019

Team (As of 31-Aug-2019)

Samy Muaddi

Samy Muaddi is a portfolio manager in the Fixed Income Division of T. Rowe Price. Mr. Muaddi is the lead manager and executive vice president of the Emerging Markets Corporate Bond Strategy and chairman of the strategy's Investment Advisory Committee. He also manages the Asia Credit Strategy and is co-portfolio manager of the Global High Income Strategy. Mr. Muaddi is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

Mr. Muaddi has 13 years of investment experience, all of which have been with T. Rowe Price. He joined the firm in 2006.

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

  • Fund manager
    since
    2015
  • Years at
    T. Rowe Price
    13
  • Years investment
    experience
    13

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $15,000 $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 $15,000 $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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