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SICAV

Emerging Markets Corporate Bond Fund

Accessing diversified emerging market corporate debt.

ISIN LU1493947888 Bloomberg TRPECAE:LX

Since Inception Annualised
(View Total Returns)

Total Assets
(USD)

5.44%
$141.3m

1YR Return
(View Total Returns)

Manager Tenure

17.13%
2yrs

Information Ratio

Tracking Error

N/A
N/A

Inception Date 20-Sep-2016

Performance figures calculated in EUR

Other Literature

31-Aug-2019 - Samy Muaddi, Portfolio Manager,
Concerns about slowing global growth, questionable monetary policy, trade wars, and geopolitical uncertainty, made markets jittery in August. Despite these macroeconomic risks, we believe the long-term outlook for emerging markets corporate debt remains broadly supportive, underpinned by healthy balance sheets, stable underlying economic growth, and rising middle class wealth. As a result, the emerging market corporate default rate is at a five-year low.
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, uncertainty has weighed on markets more recently driving up volatility. Concerns about slowing global growth, questionable monetary policy, inflated equity market valuations, trade wars, and geopolitical uncertainty, among other factors, have made markets jittery.

Emerging markets (EM) corporate bonds have performed well year-to-date, after a modest 2% decline in 2018. While returns in the 9% range have slightly lagged higher beta assets, such as U.S. high yield, EM sovereign debt, EM local currency bonds, and EM equity, we expect EM corporates to be among the most durable areas of credit if volatility picks up. This is due in part to the asset class's higher credit quality, U.S. dollar denomination, and bias toward the more defensive Asia region.

Despite exogenous macro risks, the long-term outlook for emerging markets corporate debt remains broadly supportive, underpinned by healthy balance sheets, stable underlying economic growth, rising middle class wealth, improved corporate governance, limited external vulnerabilities, and rational policy regimes in most countries. As a result, the emerging market corporate default rate is at its five-year low.

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. Specifically, we have reduced allocations in Turkey, Argentina, and Chinese high yield names while adding to higher-quality markets in Asia, the Middle East, and Latin America. We also remain focused on countries with positive reform momentum, such as Brazil and South Africa.

Going into the second half of 2019, we are cautiously optimistic given supportive EM fundamentals and the high carry profile of the asset class. That said, emerging markets 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 A | EUR)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 17.13% N/A N/A 5.44%
Indicative Benchmark % 17.21% N/A N/A 5.61%
Excess Return % -0.08% N/A N/A -0.17%

Inception Date 20-Sep-2016

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

Data as of  31-Aug-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 13.02% N/A N/A 4.17%
Indicative Benchmark % 12.99% N/A N/A 4.30%
Excess Return % 0.03% N/A N/A -0.13%

Inception Date 20-Sep-2016

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

Data as of  30-Jun-2019

Performance figures calculated in EUR

Recent Performance

  Month to DateData as of 13-Sep-2019 Quarter to DateData as of 13-Sep-2019 Year to DateData as of 13-Sep-2019 1 MonthData as of 31-Aug-2019 3 MonthsData as of 31-Aug-2019
Fund % 0.09% 4.46% 14.15% 0.86% 4.56%
Indicative Benchmark % -0.43% 4.02% 13.64% 1.23% 4.47%
Excess Return % 0.52% 0.44% 0.51% -0.37% 0.09%

Inception Date 20-Sep-2016

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 EUR

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-2019 - Samy Muaddi, Portfolio Manager,
Emerging markets corporate debt generated modest returns in August. Despite ongoing concerns about slowing global growth, stemming from trade disputes and increased geopolitical tensions, investor sentiment was boosted by expectations of more accommodative policies from central banks. Within the portfolio, the oil and gas sector contributed to relative results. An underweight allocation supported gains as concerns about slowing global growth weighed on commodities-focused industries. Our selection of higher-quality oil and gas producers that benefit from state support, such as Saudi Aramco, outperformed, while a lack of exposure to Argentine oil and gas companies further added to results. Security selection within utilities aided relative performance. Our holdings of higher-quality utilities, such Israel Electric and Indonesia’s Perusahaan Listrik Negara, added to results, while our lack of exposure to Argentine utilities provided an additional boost to performance. A small out-of-benchmark allocation to Argentine sovereign bonds, however, detracted as the country came under extreme pressure following unexpected presidential primary results. Our overall position in Argentina was underweight, however, which contributed to relative performance.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 13.97% Was (31-Jul-2019) 13.79%
Other View Top 10 Issuers

Monthly data as of 31-Aug-2019

Holdings

Total
Holdings
160
Largest Holding Globo Comunicacao E Participacoes 1.51% Was (31-Mar-2019) 1.49%
Top 10 Holdings 12.70%
Other View Full Holdings Quarterly data as of 30-Jun-2019

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating BB A
By % 12.50% -14.22%
Fund 32.32% 4.99%
Indicative Benchmark 19.82% 19.22%

Average Credit Quality

BB

Monthly Data as of 31-Aug-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 7-10 Years 10+ Years
By % 6.99% -9.20%
Fund 25.48% 6.27%
Indicative Benchmark 18.50% 15.47%

Weighted Average Maturity

6.64 Years

Monthly Data as of 31-Aug-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 % 10.64% -7.71%
Fund 30.65% 17.68%
Indicative Benchmark 20.01% 25.39%

Weighted Average Duration

5.50 Years

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

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

Domestic Demand Could Drive Opportunities for Growth

We added to our overweight allocation to the technology, media, and telecommunications sector. We participated in a new issue by investment-grade, Chinese social media company Weibo and initiated a new position in Brazilian telecom Oi on attractive relative value.

Adding to our overweight in real estate, we initiated a new position in high-yielding Indonesian property developer Jababeka following the successful reelection of President Joko Widodo. We also added to our holdings of Chinese developers Country Garden and Evergrande.

We also added to the portfolio's overweight allocation to the transportation sector. We added to Brazilian airline Azul.

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

The financials sector remains the largest underweight, and we further reduced financial holdings during the quarter. After an extended period of positive performance, we eliminated holdings of Banco Macro. Similarly, positions in Turkish banks Akbank and Garanti were trimmed as well.

The oil and gas sector is a meaningful underweight, and we reduced our allocation to the sector by eliminating YPF and trimming Kosmos and Tullow. The portfolio remains focused on quasi-sovereigns such as Abu Dhabi National Energy and Petrobras.

Though we maintained our underweight allocation to the metals and mining sector, we added to holdings. We participated in new issues from steel producers CSN and JSW Steel.

Credit Quality Considerations

From a secular perspective, we find the most value in BB to 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 Chilean pulp producer Celulosa Arauco. 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 19.02% Was (31-Jul-2019) 18.42%
Other View complete Sector Diversification

Monthly Data as of 31-Aug-2019

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

Largest Overweight

TMT
By7.24%
Fund 19.02%
Indicative Benchmark 11.78%

Largest Underweight

Financial
By-16.56%
Fund 12.78%
Indicative Benchmark 29.34%

Monthly Data as of 31-Aug-2019

31-Aug-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
36
Largest Country China 14.24% Was (31-Jul-2019) 16.84%
Other View complete Country Diversification

Monthly Data as of 31-Aug-2019

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

Largest Overweight

China
By6.35%
Fund 14.24%
Indicative Benchmark 7.89%

Largest Underweight

South Korea
By-4.25%
Fund 0.00%
Indicative Benchmark 4.25%

Monthly Data as of 31-Aug-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 (31-Jul-2019) 100.00%
Other View complete Currency Diversification

Monthly Data as of 31-Aug-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-Aug-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
    2016
  • 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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