AllianceBernstein's Shamaila Khan has increased her exposure to Russian sovereign bonds in order to capitalise on high yields and attractive valuations.
Speaking to Citywire Global, Khan said she had sold her Russia corporates holding in early 2014 but started building up a position in sovereign bonds at the end of last year.
Currently, the AllianceBernstein Emerging Market Corporate Debt fund, which she co-manages with Citywire + rated Paul DeNoon and Citywire + rated Douglas Peebles, still has an underweight position in Russia.
‘The sovereign space in Russia is more liquid than the corporate one. We don’t think there is a real default threat, although the geopolitical situation is still critical,’ she said.
‘This is a position we evaluate every single day. We might start adding into corporates in the future when the whole situation with Ukraine will become clearer.’
On the corporate side, according to Khan, Russia has a very vulnerable banking sector. ‘We are very cautious as we don’t want to be caught in a situation where some of our possible investments become the target of Western sanctions.’
The manager added she has had no exposure to Ukraine for the past few years.
Khan’s favourite play
Elsewhere in the fund, the Citywire + rated manager has been positioned for a stronger US dollar for the past two years.
She has been strongly overweight exporters that have revenues in dollars and costs in local currencies in countries such as Mexico, Peru, Chile and India.
‘These countries are moving in the right direction in terms of economic growth and reforms. In particular, we like telecommunication companies in India, as well as utilities in Chile and Peru,’ she said.
In Brazil, the manager favours beef companies which have significantly improved their offering diversification.
Khan is avoiding the financial sector – the biggest underweight in the fund – especially in countries which are proving weaker on the macro side, such as Russia and Brazil.
In the whole EM universe, she is increasingly cautious on high yield names because of the significant default rate and lack of liquidity.
Over the past three years to March 2015, the AllianceBernstein’s Emerging Market Corporate Debt fund returned 15.12%. This is while its Citywire benchmark, the JPM EMBI Global index, rose 13.73%.