Fidelity International has launched a new fixed interest fund investing in global emerging market debt securities (EMD).
Managed from Boston by John Carlson, the Emerging Markets Debt fund is the first of its kind run by Fidelity International. The group has run a similar portfolio in the US for over 10 years. This is the second vehicle Fidelity has brought over from the US in the space of a month, following the launch of the Global Property fund.
The portfolio will typically hold between 30 and 35 securities and will be benchmarked against the JP Morgan EMBI Global Index. Carlson previously ran the US equivalent, the $1,824m Fidelity New Markets Income fund. The UK version will reside in the S&P Global Emerging Market Debt sector.
While primarily invested in securities, the fund has the scope to invest in other areas such as local market debt instruments, fixed income, equity securities and corporate bonds of emerging market issuers, and lower debt securities.
Constructed on a bottom-up, bond by bond basis, the manager seeks to limit risk with a slight deviation away from the funds benchmark. As a result, the portfolio is likely to be overweight in a single country by more than 500 basis points in relation to the benchmark. There will also be no more than a 25% weighting in a single country regardless of that country's weight in the benchmark.
Between 80%-85% of the portfolio is in bonds, while the rest will be composed from out-of-index securities, which Carlson believes represent better value. These bonds are typically local currency sovereigns or corporate bonds issued in local currency or US dollars. These out-of-index issues are limited to a maximum of 2% of the fund.
Valued at almost $800bn, this is fast-growing global market. The fund is structured as a Luxembourg-domiciled Sicav. The manager aims to beat the funds benchmark with a running yield of 7.2%.
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