Nikko Asset Management is strengthening its Asian fixed income range with the launch of two Luxembourg-domiciled Ucits funds investing in renminbi bonds and Asian credit.
Charlie Metcalfe, president at Nikko Asset Management Europe, says another local currency fund is in the pipeline.
The Nikko AM RMB Bond Fund, which has not been launched yet, invests in offshore renminbi-denominated bonds, issued by governments, corporate and financial institutions.
It holds 38 bonds, mostly rated BBB, with an average modified duration of 2.18 and an effective duration of 2.24. The average coupon rate per year is 3.82% and the yield to maturity 4.86%.
The Nikko AM Asian Credit Fund, which launched on November 2, invests in dollar-denominated fixed income securities issued by Asian corporates, sovereigns or quasi-sovereigns, and supranationals.
It holds 62 bonds, mostly rated BBB+, with an average modified duration of 4.18 and an effective duration of 4.26. The average coupon rate is 5.12% and the yield to maturity 3.58%.
Koh Liang Choon, head of fixed income at Nikko Asset Management Asia, says Asian credit should be considered “a standalone credit class within emerging market credit”. He says investing in Asian credit is no longer about opportunistic allocation.
“The size of the Asian credit market has more than doubled in the past four years,” he says. “We would like to see longer issuances and more rated issues because many are not rated by international ratings agencies.”
Albeit growing from a low base, the Asian credit market is expanding rapidly. At the same time, the range of issuers, investors and market makers is also increasing.
Investment grade corporate bonds have been the fastest growing category.
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