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ASI launches its first FMP in Singapore

Aberdeen Standard Investment is the latest asset manager to sell a fixed maturity product (FMP), generating income through allocations to emerging market bonds.

The UK-based asset manager launched its first FMP this week, the Emerging Markets Bond Fixed Maturity 2023 Fund in Singapore, according to a statement from the firm.

Record low yields have left investors with the increased risk of eroding their wealth over time. With interest rates extremely low, investors are looking for sustainable sources of income,” Campbell Fleming, global head of distribution at ASI said in the statement.

“A fixed maturity product could potentially help investors fill this income gap. The long-term aim is for [this fund] to be the first in a series of FMPs,” he added.

The Luxembourg-domiciled fund aims to achieve income generation and capital preservation over its term to October 2023, by investing at least two-thirds of its assets in emerging market government and corporate bonds. During September, the product raised $167m from a mixture of Europe- and Asia-based investors.

“The product was authorised for retail investors only in Singapore, but available for professional investors in both Hong Kong and Singapore,” a spokeswoman for the firm told FSA.

She added that, “the bulk of the flows came from the high net-worth and private banking client segment in Asia.”

The fund distributes income quarterly and has an indicative yield of 4.0%-4.2%. The average credit rating of the portfolio is BBB- (the minimum investment grade category) and its 60-80 individual holdings are diversified across a range of regions and sectors, according to the fund’s factsheet.

Asia is the fund’s biggest regional bet (28.6%), and financials comprise the largest sector exposure (37.4%).

Case for emerging markets 

Companies across emerging market regions have improved their balance sheets in recent years, reducing leverage and increasing interest cover,” Donald Amstad, COO for distribution & head of investment specialists in Asia-Pacific at ASI told FSA earlier.

Their leverage is the lowest since 2012 and interest coverage is the most since 2013, according to Bloomberg data. In contrast, US corporate net leverage is at 15-year highs, with the average net debt-to-ebitda ratio at 2.5 times.

ASI believe that emerging market bonds have additional advantages, long-term support from structural changes in in emerging economies, improving credit fundamentals, defensive qualities and attractive yields.

Other fixed income fund managers are also turning more positive on emerging market bonds in general, including Western Asset Management, highlighting the appeal of Asian bonds during a period of falling US interest rates, lower regional inflation and political stability in most Asian countries.

T Rowe Price also believes Asian credit offers an attractive risk-adjusted return profile compared with other fixed income categories.

FMP popularity

Meanwhile, several asset managers have been launching FMPs this year to meet investor demand for secure, stable income.

In September, Hang Seng Investment Management launched its second FMP, following the launch of a FMP in July, the Hang Seng Asia Bond Fixed Term Fund 2022, which invests in US dollar-denominated Asian debt securities.

Also in July, Invesco launched its first retail FMP in Hong Kong, the Global Bond Fixed Maturity Fund 2022, which raised $301m. In the following month, it received approval from the Securities and Futures Commission to launch another FMP.

Other fund managers have also sold FMPs to retail investors in Hong Kong, including HSBC Global Asset Management and Bea Union Investment Management, FSA previously reported.

ASI Emerging Markets Bond Fixed Maturity 2023 Fund: regional and sector allocations

Source: Aberdeen Standard Investment, September, 2019.


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