Jupiter Global Emerging Market Debt Strategies
Emerging market debt (EMD) continues to be one of the fastest-growing fixed income sectors, having expanded into a widely diversified universe, as governments and companies in some of the world’s most dynamic economies have tapped into global markets.
Jupiter’s EMD investment team firmly believe that EMD deserves a permanent place in investors’ portfolios. The asset class offers diversification through the cycle; a high yield relative to the rest of fixed income, where around 90% of the universe yields less than 3%; and volatility about half that of the S&P 500 Index1. Nevertheless, while the asset class’s opportunities are evident, it’s still significantly underrepresented in global portfolios and indices.
When investing in such a diverse asset class, the team believe that being selective, active and risk-aware is crucial. They understand the unique opportunities and challenges that each part of the investment universe represents, helping investors to navigate this complex landscape.
The investment team’s flexible mandate means they can invest across the global emerging markets fixed income universe in sovereign and corporate bonds, denominated in both hard and local currencies.
Jupiter EMD Platform – Expertise across markets
The team seek to identify investments that attractively compensate for global and EM country-specific risks and corporate credit risk, using a combination of top-down and bottom-up fundamental research techniques and proprietary valuation tools. In other words, they conduct ‘deep dive’ research to answer the question: “Are we getting paid for the risk we take?”
The team’s investment process also incorporates a variety of risk mitigation strategies to manage drawdowns and to construct an ‘all seasons’ portfolio.
1 Source: Bloomberg, to 30.09.2021. Hard currency EMD.
Jupiter Global Emerging Markets Short Duration Bond
The Jupiter Global Emerging Markets Short Duration Bond fund is a ‘go anywhere’ short duration bond strategy, designed for any point in the cycle. It is a great way for investors to gain exposure to the yield premium offered by EMD, while also limiting volatility and drawdowns.
Flexibility: The fund can invest in both sovereign and corporate bonds, giving it the flexibility to look for value across the whole EMD spectrum.
Limited volatility: The team’s risk aware approach and focus on limiting downside has helped to limit what could have been much larger drawdowns, and it has put the fund in a strong position relative to many of its peers.
Limited duration and credit risk: The fund’s average effective duration will not exceed three years, and we never use derivatives to manage duration – the fund’s duration is simply the average duration across all bonds held in the portfolio. In terms of credit risk, while the fund can invest in lower-rated bonds, its average credit rating will not fall below BB2.
Use of CDSs and local currency hedging: The team have the ability to add protection effectively through credit default swaps (CDSs) and hedges against local EM FX.
Jupiter Global Emerging Markets Corporate Bond
Emerging market corporate bonds are an often-underappreciated part of the emerging market debt landscape for investors used to focusing on sovereign debt. In fact:
- Corporates have had better risk-adjusted returns than sovereigns over the last decade
- The corporate market is around twice the size of the sovereign market
- The corporate index has a higher investment grade allocation than sovereign
- EM credits pay a premium over developed market, which in many cases is not justified
- The corporate market is incredibly diversified across sectors and geographies
- EM credits almost always offer a higher spread than their sovereign equivalent for the same rating
The Jupiter Global Emerging Markets Corporate Bond fund provides focused exposure to a highly diversified EM credit market, a key growth area over the next decade.
Focusing on identifying strong bottom-up stories: The team identify companies with strong fundamentals that are trading at attractive valuations.
Adopting an all-weather approach: The team seek to deliver a consistent yield through the market cycle to offer a core, long-term portfolio holding.
Being risk aware: The team use top-down macro insights to help reduce drawdown and ensure they are paid for the risk we take.
Jupiter Emerging Market Debt Fund
The Jupiter Emerging Market Debt Fund is an actively managed strategy focused on hard currency sovereign debt.
Why invest in EM sovereign debt?
- Gain exposure to the oldest and best known EMD asset class
- Access attractive yields, as well as regional diversification
- The fund seeks to outperform the most followed EMD benchmark
Jupiter Emerging Market Debt Income Fund
The Jupiter Emerging Market Debt Income Fund takes a blended approach across the EMD spectrum, with a higher yield objective. The fund is designed for any point of the cycle; the allocation across the EMD asset types is dynamic through time.
Why Jupiter for Emerging Market Credit?
- Comprised of 70 to 90* best ideas across emerging markets
- Invests across hard currency corporate and sovereign debt, with the ability to add up to 10% in local currency debt and opportunistic ideas
- A minimum of 60%* of the fund is invested in high yield
- Up to 10%* of the fund is invested in distressed and opportunistic ideas
* Approximate/estimated. Not fund constraints.
Important information
Jupiter Global Emerging Markets Short Duration Bond:
The fund invests in emerging markets which carry increased volatility and liquidity risks. It may invest in bonds which have a low or no credit rating including high yield and distressed bonds. These bonds may offer a higher income but carry a greater risk of default, particularly in volatile markets. Monthly income payments will fluctuate. In difficult market conditions, it may be harder for the manager to sell assets at the quoted price, which could have a negative impact on performance. In extreme market conditions, the fund’s ability to meet redemption requests on demand may be affected. Some share classes charge all of their expenses to capital, which can reduce the potential for capital growth. Please see the Prospectus for information. The KIID/KID and Prospectus are available from Jupiter on request. This fund can invest more than 35% of its value in securities issued or guaranteed by an EEA state.
Jupiter Global Emerging Markets Corporate Bond:
The fund invests in emerging markets which carry increased volatility and liquidity risks. It invests primarily in bonds which have a low or no credit rating including high yield and distressed bonds. These bonds may offer a higher income but carry a greater risk of default, particularly in volatile markets. Monthly income payments will fluctuate. The fund uses derivatives, which may increase volatility. Investment in financial derivative instruments can introduce leverage risks which can amplify gains or losses in the fund. Counterparty risk may cause losses to the Fund. In difficult market conditions, it may be harder for the manager to sell assets at the quoted price, which could have a negative impact on performance. In extreme market conditions, the fund’s ability to meet redemption requests on demand may be affected. Some share classes charge all of their expenses to capital, which can reduce the potential for capital growth. Please see the Prospectus for information. The KIID/KID and Prospectus are available from Jupiter on request. This fund can invest more than 35% of its value in securities issued or guaranteed by an EEA state.
Jupiter Emerging Market Debt Fund
- Investment risk – there is no guarantee that the Fund will achieve its objective. A capital loss of some or all of the amount invested may occur.
- Emerging markets risk – less developed countries may face more political, economic or structural challenges than developed countries.
- Credit risk – the issuer of a bond or a similar investment within the Fund may not pay income or repay capital to the Fund when due. Bonds which are rated below investment grade are considered to have a higher risk exposure with respect to meeting their payment obligations.
- Bond Connect Risk – The rules of the Bond Connect scheme may not always permit the Fund to sell its assets, and may cause the Fund to suffer losses on an investment.
- Interest rate risk – investments in bonds are affected by interest rates and inflation trends which may affect the value of the Fund.
- Liquidity risk – some investments may become hard to value or sell at a desired time and price. In extreme circumstances this may affect the Fund’s ability to meet redemption requests upon demand.
- Currency risk – the Fund can be exposed to different currencies. The value of your shares may rise and fall as a result of exchange rate movements.
- Derivative risk – the Fund uses derivatives to generate returns and/or to reduce costs and the overall risk of the Fund. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment. Derivatives also involve counterparty risk where the institutions acting as counterparty to derivatives may not meet their contractual obligations.
- Capital erosion risk – the Fund takes its charges from the capital of the Fund. Investors should be aware that there is potential for capital erosion if insufficient capital growth is achieved by the Fund to cover the charges. Capital erosion may have the effect of reducing the level of income generated.
For a more detailed explanation of risks, please refer to the “Risk Factors” section of the prospectus.
Jupiter Emerging Market Debt Income Fund
- Investment risk – there is no guarantee that the Fund will achieve its objective. A capital loss of some or all of the amount invested may occur.
- Emerging markets risk – less developed countries may face more political, economic or structural challenges than developed countries.
- Credit risk – the issuer of a bond or a similar investment within the Fund may not pay income or repay capital to the Fund when due. Bonds which are rated below investment grade are considered to have a higher risk exposure with respect to meeting their payment obligations.
- Bond Connect Risk – The rules of the Bond Connect scheme may not always permit the Fund to sell its assets, and may cause the Fund to suffer losses on an investment.
- Interest rate risk – investments in bonds are affected by interest rates and inflation trends which may affect the value of the Fund.
- Liquidity risk – some investments may become hard to value or sell at a desired time and price. In extreme circumstances this may affect the Fund’s ability to meet redemption requests upon demand.
- Currency risk – the Fund can be exposed to different currencies. The value of your shares may rise and fall as a result of exchange rate movements.
- Derivative risk – the Fund uses derivatives to generate returns and/or to reduce costs and the overall risk of the Fund. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment. Derivatives also involve counterparty risk where the institutions acting as counterparty to derivatives may not meet their contractual obligations.
- Capital erosion risk – the Fund takes its charges from the capital of the Fund. Investors should be aware that there is potential for capital erosion if insufficient capital growth is achieved by the Fund to cover the charges. Capital erosion may have the effect of reducing the level of income generated.
For a more detailed explanation of risks, please refer to the ‘Risk Factors’ section of the prospectus.
The Prospectus and Key Investor Information Document (KIID) or Key Information Document (KID) are available in English and other languages required by the local applicable law free of charge in the document library. A summary of investor rights in English can be found here or in the document library. The Management Company may terminate marketing arrangements.
Meet the team
Jupiter Emerging Market Debt Team
The Jupiter Emerging Market Debt strategy is led by investment manager Reza Karim. Reza Karim is supported by investment manager Alejandro Di Bernardo, investment analyst Xuchen Zhang, and investment director Valerio Angioni.
Literature
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