The EM credit universe is growing rapidly with increased governance, sophistication and prospects for expansion meaning that developing world players are quickly gaining ground on their rivals.
But, as the market grows, who has ridden the rising wave and could be best positioned to pivot away from danger if the sudden euphoria evaporates?
At present there are 113 fund managers with at least one year’s investment experience in the EM Global Corporates sector and 38 of these can boast track records charting back to December 2012.
Here we take a closer look at the five fund managers and manager teams who have proven their ability to outperform the average manager in each of the past five years.
Peter Eerdmans/Victoria Harling, Investec
Five-year total return (December 12-December 17): 30.89%
Best year of outperformance vs. average: +4.68% in 2013/14
The duo boasting the best level of outperformance versus the average manager are Investec pair Peter Eerdmans, who is Citywire + rated, and Citywire AAA-rated Victoria Harling. The pair currently run two credit-focused EMD funds together but the Investec GSF Em Mkts Corp Debt fund is recognised here, as it was launched in April 2012.
In this $1.3 billion fund, Harling and Eerdmans invest primarily in Brazil with 13.6% of the fund allocated here. This is with Mexico (11.8%) and China (11.2%) being the second and third largest allocations as at the end of December 2017. Financials makes up the largest sector bet at 23%. The duo boast the biggest level of outperformance compared to the average, having returned 4.68 percentage points more than the average peer in 2013/14.
Colm McDonagh, Insight Investment
Five-year total return (December 12-December 17): 36.04%
Best year of outperformance vs. average: +4.55% in 2015/16
Insight IM’s Colm McDonagh is the strongest outperformer in absolute terms over the five-year analysis period and sits second out of the 38 managers with a five-year record. McDonagh has run the BNY Mellon Emerging Markets Corporate Debt fund on behalf of Insight IM’s owner since early 2012.
In this fund, which has $344 million in assets, McDonagh has the bulk of the fund is allocated to investment grade debt at 53% but this is a minor underweight to the index. At a country level, McDonagh favours Chinese credit, which accounts for 12% of his total allocation, while oil & gas is the strongest sector position at 20.5% of investments.
Brett Diment/Siddharth Dahiya, Aberdeen AM
Five-year total return (December 12-December 17): 29.58%
Best year of outperformance vs. average: +3.74% in 2014/15
Rounding out our quintet are the experienced Aberdeen AM duo of Brett Diment and Siddharth Dahiya, who have co-run the AG EM Corporate Bond fund since taking over from Esther Chan on December 2010. The managers run several funds on their own in the EMD world but this is the only one they co-run.
In terms of performance, they have achieved a lower absolute outperformance than the other three managers on this list and also have the smallest margin of outperformance versus the average manager. This includes losing 1.07% in 2012/13 at a time when the average manager lost 1.62%, showing a narrow escape.