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Emerging talent: three Europe-focused EMD managers on the rise

Citywire Investment Research runs the rule over those making ratings-worthy performances in Europe's rising markets.

Emerging Market Bonds

Market Overview

There are 128 managers that have received ratings within the Emerging Market Bonds asset class this month, of which a total of 7 were AAA rated, 18 AA, 48 A and 55 achieved a + for outperformance against their peers.

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Comeback Star

Comeback Star: Jean-Jacques Durand, Edmond de Rothschild AM

Rating: AA rated in Bonds - Emerging Markets Global Hard Currency

Overview

The comeback star this month is Citywire AA rated Jean-Jacques Durand, who was last rated in May 2016. His performance is drawn from the Edmond de Rothschild Fund-Emerging Bonds K EUR fund, which he has managed since inception in Jan 2016. His performance was stitched together with the predecessor of the fund, the Edmond de Rothschild Emerging Bonds C fund.

During the last five years, Durand has returned 79.2%, while the average manager in the Bonds - Emerging Markets Global Hard Currency sector returned 22.9% in US dollar terms. The Edmond de Rothschild Fund-Emerging Bonds K EUR fund has consistently beaten its benchmark over time one, three, five and 10 years.

The largest geographical allocation in the fund is Venezuela, which makes up 20% of exposure, however, the largest single holding is a Republic of Turkey bond, which makes up 13% of the allocations. Commodity trader Noble was a significant contributor to the fund’s performance since 2016 but faced unexpected Q1 loss in 2017 which impacted investor sentiment.

Durand believes Noble has returned to ‘square one’ and ‘should be able to restructure its business and capital structure’, while there is a possibility of a strategic partnership with a Chinese state-owned entity. Durand’s positive sentiment is reflected in his additional purchases of the company’s bonds in May.

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One to Watch

Fund Manager: Thierry Larose, Degroof Petercam

Rating: AAA rated in Bonds - Emerging Markets Global Local Currency

Overview

The manager to watch this month is AAA-rated Thierry Larose, who has been consistently AAA rated by Citywire over the last 17 consecutive months.

Larose returned 3.5% over the past three years, while the average manager in Bonds - Emerging Markets Global Local Currency sector lost 7.6% in US dollar terms. The contributor to his performance in the sector was the DPAM L Bonds Emerging Markets Sust B EUR Cap fund.

Larose’s largest country exposures are Mexico and Brazil, which account for 9.9% and 8.8% of the fund’s investments, respectively. Commenting on recent political and corruption scandals in Brazil, Larose said he believes President Temer will survive the ‘storm but his popularity is now lower than ever’.

Despite the expected volatility, Larose said macro-economic indicators are either ‘better or on a brink of turning the corner’. He also said the Central Bank and National Treasury are intervening to provide liquidity and reduce volatility, which has resulted in him increasing exposure to local Brazilian debt (currency-hedged).

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Rising Star

Fund Manager: Lutz Röhmeyer, LBB Invest

Rating: A-rated in Bonds - Emerging Markets Europe

Overview

Moving up the ratings this month is Lutz Röhmeyer, who goes from Citywire + rated to A-rated this month. His performance is drawn from the Multizins-INVEST fund, which has been under his management since June 2004.

On a five-year basis, Röhmeyer returned 29.7%, while the average manager in the Bonds - Emerging Markets Europe sector returned 19.1% in euro terms over the same time period.

The Multizins-INVEST fund invests in a selection of local currencies issued in the Eastern Europe and EU convergence area. The fund’s largest bond currency issues are the euro (29.36%), Polish zloty (14.02%) and Turkish lira at (10.81%). The credit ratings are diversified across investments grade and high yield issues while the largest exposure is BBB which makes up 27.34% of the fund’s holdings.

In his latest update, Röhmeyer highlighted his new acquisition of the bond issued by the Bank of Georgia which was denominated in its local currency lari with a coupon of 11%, which, in the manager’s view, is really ‘interesting’.

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Related Fund Managers

Thierry Larose
Thierry Larose
12/119 in Bonds - Emerging Markets Global Local Currency (Performance over 3 years) Average Total Return: 3.31%
Jean-Jacques Durand
Jean-Jacques Durand
1/155 in Bonds - Emerging Markets Global Hard Currency (Performance over 3 years) Average Total Return: 33.69%
Lutz Röhmeyer
Lutz Röhmeyer
1/15 in Bonds - Emerging Markets Europe (Performance over 3 years) Average Total Return: 9.48%
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