The local currency sector is constantly evolving, with the strength of the US dollar driving investors reappraise and capitalise on opportunities in this space. So, how are leading players over the longer term reacting to this changing market?
In this analysis, Citywire Selector focuses on the two local currency managers topping the sector on a five-year total return basis.
*Data covers the period January 2013 – January 2018
Vladimir Milev, Payden & Rygel IM
Portfolio manager, Payden Global Emerging Markets Bond
Performance: Five-year total return of 12.25% with a Manager Ratio of -0.08
Experience: Milev has been at the same firm for a long time, having started at US-based Payden & Rygel investment house in 2003 as emerging markets bonds trader.
Citywire Rating: Milev achieved his first rating at the end of December 2016 and held an A rating for seven consecutive months in 2017 before dropping to a + rating in April.
Investment Style: Milev invests in bonds from Latin America, Asia and Europe denominated in US dollars, euros and emerging market local currencies. He has a number of unhedged positions in his portfolio which account for 30% his overall allocation. In comparison to Wozniak he has a slightly lower exposure to local currency sovereign bonds, which account for 88% of his $10.7 billion fund.
Milev’s top two positions by country are Brazil and Indonesia but he has less exposure to Russia than Wozniak. Ukraine, Egypt and Malaysia also feature in his top 10 investments by country. The average duration of the fund’s investments is 6.6 years and the average credit rating is BB+. Milev’s Manager Ratio is also quite low at -0.08, which again, reflects his appetite for risk.
Michal Wozniak, BlackRock
Performance: Five-year total return of 12.46% with a Manager Ratio of -0.07
Experience: Wozniak joined BlackRock’s emerging markets debt team as a portfolio manager in 2013. Previously he was a fund manager EMD at Lombard Odier Investment Managers and JPMorgan Asset Management. Prior to that he was responsible for Eastern European strategies at Fortis Investments in London.
Citywire Rating: Wozniak has only been rated once by Citywire in 2010. This was in December 2017 when he was + rated.
Investment Style: The manager’s only Luxembourg-domiciled fund is the BGF Emerging Markets Local Currency Bond strategy, which has almost $6 billion (€4.8 billion) of assets. Wozniak co-manages the fund with Sergio Trigo Paz and Laurent Develay. These managers are not represented here due to their differing track records in this sector.
The strategy currently invests 91.98% in local government debt and its top country allocation is an overweight exposure to Brazil. The two other significant investments on a country level are Indonesia and Russia.
The effective duration of the fund is 3.96 years, while the majority of holdings are BB-rated. Wozniak’s low Manager Ratio, currently in negative territory, indicates he takes a relatively high amount of risk to achieve his strong returns.
This article originally appeared in the February edition of Citywire Selector magazine.