The Aberdeen Standard Sicav I – ASI-CCBI Belt & Road Bond Fund aims to deliver long-term return by investing in bonds issued by sovereigns, government-related bodies and companies that could potentially benefit from the infrastructure and trade projects that comprise the BRI.
The fund launch marks the start of a strategic partnership between the two firms, which aims to collaborate on product innovation and investment research, according to a statement from Aberdeen Standard Investments (ASI) press statement.
The BRI is a global development strategy introduced by the Chinese government in 2013 ostensibly to promote land and sea connectivity across Asia, Europe, Middle-East, and Africa and their adjacent seas to establish and strengthen economic cooperation.
The investment universe of Belt and Road-related countries and sectors is $3.8trn as of end-September, according to Bloomberg data, presenting “ample opportunities for investors seeking to diversify from low-yielding developed market bonds,” noted Adam McCabe, head of fixed income for Asia and Australia at Aberdeen Standard Investments in the statement.
“Despite many challenges created by the Covid-19 pandemic, China remains committed to its Belt and Road Initiative and redoubling its efforts to focus on the ongoing sustainability of development into its neighbouring corridors,” he said.
At least 80% of the Fund will be invested in US dollar-denominated emerging market debt, including frontier market bonds. It is benchmark agnostic and will have significant exposure to Asian and China credit given their importance in the BRI initiative and more attractive risk-return profiles compared to the rest of the emerging market credit space, according to the statement.
Bond issuance by Asian companies and governments in the international bond markets has run at a record pace this year, with borrowers in the region tapping into demand from yield-hungry investors.
Issuers in Asia, excluding Japan, have sold $354bn worth of dollar bonds year-to-date, up 13% from a year ago and a record high for the period, according to data from Refinitiv.
“Asian and China credit are offering appealing risk-adjusted returns, valuations look relatively attractive and investors are being paid for the risk they take,” said McCabe.
Recent Asian bond fund launches have typically attached an ESG theme, including products offered by Manulife IM and JP Morgan AM.
The Luxembourg-domiciled ASI-CCBI fund will only be available to professional investors in Hong Kong and Singapore.
It will be managed by ASI’s Asian fixed income team, with support from the firm’s general emerging market debt team.
CCB International Asset Management, a subsidiary of CCB International (CCBI), will act as an investment adviser and provide BRI and China bond recommendations to help ASI’s decision making process.
Their analysts will try to identify emerging countries and leading corporates across different sectors that could benefit from the BRI, which represent some of the biggest infrastructure and trade projects in the world.
“The new strategy builds on the combined strength of our emerging market fixed income expertise and CCBI’s local insights into Belt & Road opportunities,” said Hugh Young, head of Asia Pacific, Aberdeen Standard Investments
Edinburgh-based Aberdeen Standard Investments manages $562.9bn of assets worldwide (as at 30 June 2020), and CCB International is a financial and investment services company owned by China Construction Bank.