Emerging market bonds finding favour as L&G launches new fund

30th November 2012

 

Emerging market government bonds are featuring increasingly in many investors' portfolios as some of the assumptions about developed market bonds’ safe haven status are questioned.

Fund manager Legal & General is launching a low cost passively managed bond index fund with an annual management charge of 0.3 per cent denominated in dollars.

The fund will follow the JP Morgan Emerging Markets bond index plus and will be managed by Lee Collins.  

L&G Investments managing director Simon Ellis says: “Emerging market government bond funds represent a significant opportunity for investor portfolios, with yields that typically outstrip those of developed market government bond funds. They also act as a diversifier in portfolios with concentrated holdings of conventional gilts or corporate bonds.”

Many fund managers have suggested recently that the returns from safe haven government debt such as US treasuries, UK gilts and German bonds may underperform. HSBC suggested earlier this month that emerging market debt might represent an interesting alternative.

It is of course very sensible to consider how such an asset class fits with your attitude to risk. If you have an adviser it may make sense to talk to them about the asset class and its use as a diversifier. 

 

10 thoughts on “Emerging market bonds finding favour as L&G launches new fund”

  1. forbin says:

    Hello Shaun,

    “Without this engine a ‘creditless’ recovery will be much more problematic, if not impossible.”

    well yes , if you are fixated on the only way to make money is to borrow it !

    if we take

    “In the current situation, recovery without a credit boost is unlikely to happen.”

    and re-write that to

    “In the current situation, recovery without a wage boost is unlikely to happen.”

    thats more like it , we need better paid employees not more debt

    debt is how we got here – DUH!

    Forbin

    1. Dan Hill says:

      As the only way money is created is to be borrowed into existence in this debt based monetary system, the DNB is sadly right. Or if we want a proper recovery we can get to some serious reform of the system.

      1. forbin says:

        true Dan , thats the landscape we live in

        but increasing wages I’s posit would mean that the people could borrow more as a muliplier

        decreasing wages therefore all being equal would mean less borrowing

        now add in repayments as its more cost effective in a low saver rate world to pay off high interest debt – I do note that banks and building soc rates , yet alone credit cards , are relatively high and expensive…..

        so its seems a toxic mix to me

        Forbin

        PS: atleast I can get popcorn still without a mortgage…..

  2. Mike from Enfield says:

    Hi Shaun,

    Interesting to see that it is not just the UK with a problem of mortgages with no accompanying repayment vehicle. A quick Google suggests there are about 2.5 million in the UK (sounds a lot to me – any idea if it is right?). The same Google search shows they are still available too.

    The Guardian reckons about half will not be repaid. This would seem to be a big problem already in the pipeline with no way of avoiding it; and I don’t just mean for the home-owners. How come it gets so little attention?

    1. Anonymous says:

      Inflation reduces the outstanding loan substantially in real terms over (say) 25 years. People are expecting that and governments oblige! But there is still a problem. It will be big and I expect the taxpayer will help out.

      1. Anonymous says:

        Hi Barncactus

        That is the conventional view and pre credit crunch was pretty much a given. But now with the falls in real wages of 8%+ since the credit crunch there is a challenge from that route.

        Mind you we also have Help to Buy and various other schemes pumping up house prices…

    2. Anonymous says:

      Hi Mike

      The Financial Conduct Authority ( which has replaced the FSA in the way that Sellafield replaced Windscale…) investigated interest-only mortgages in May and here are its findings.

      “2.6 million interest only mortgages will be due for repayment and while nine out of ten (90 per cent, 2.34 million people) have a strategy to repay their mortgage, 10 per cent do not – equivalent to 260,000 people. ”

      I wonder all the 90% have a strategy or some merely said they do!

      So your numbers look accurate but the FCA is much more sanguine or perhaps complacent than the Guardian.

      “The findings show that many people should be in a good position to repay their mortgage when it is due for repayment”

      “many” and “should be” does not look entirely convincing does it?

      2017/18 should be one of the peak times according to the FCA.

      1. ernie says:

        Hi Shaun

        You just need to have been alive and reasonably sentient in the UK during the last 10 years to know that there is no chance that 90% of IO mortgagees have a plan to repay. Maybe they meant 9%?

  3. forbin says:

    Hello Shaun

    if make you wonder what solution the dutch could use

    too wedded to the euro to leave – can you imagine the uproar over that

    reform their banks – well they are going to be in the big euro zone bank soon unless the Germans balk at it – what out Merkel !

    so what do they do ?

    trade popcorn ?

    Forbin

    1. Anonymous says:

      Hi Forbin

      Agreed that they are wedded to the Euro and with their trade surplus it is not so easy to make a case for leaving. However they are facing- like so many- a fall in living standards and a declining economy.

      I think that they need to choose between their banks and their economy….

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