Understanding The Fund: Eastspring Investments – Asian High Yield Bond Fund
Leong Wai Mei, Fund Manager of Eastspring Investments â Asian High Yield Bond Fund, shares with Fundsupermart the investment strategy of the fund and the areas the fund is positive on.
1. Since the Eastspring Investments - Asian High Yield Bond Fund was only launched in March of this year, can you tell us more about its investment philosophy and strategy?
In general, the Eastspring Investments Singapore's Fixed Income team adopts a multi-factorial investment approach that takes into account the fundamental, valuation and technical analysis of the Asian bond market at both top-down and bottom-up level.
On a top-down perspective, this involves the analysis of the macroeconomic environment, broad credit trends, risk appetite, as well as the supply and demand of the Asian credit market. This is necessarily combined with our bottom-up views on the individual credit issuers. The bottom-up analysis is undertaken by our team of dedicated credit analysts who are responsible for assessing the credit quality of individual issuer by interacting with the companyâs management, analyzing the company's financials and what has been priced in by the market.
In managing the Eastspring Invesments - Asian High Yield Bond Fund, we consider the bottom-up analysis to be the key source of value-add as issuer-specific risks for this segment of the market are significantly higher. An in-depth analysis of the individual high yield issuer is thus necessary to differentiate issuers with better credit quality and those which may potentially default on its debt obligations.
2. How many holdings does the fund have, and how many issuers does it have exposure to?
As at end June 2012, the fund held 114 bond securities issued by 93 corporate, sovereign and quasi-sovereign entities.
3. Is there a maximum exposure the fund can have to a single issuer?
The fund's investment restrictions prohibit the fund from investing more than 10% of the fund in a single non-government bond issuer. In reality, however, the fund's exposure to a single non-government bond issuer is typically less than 5% of the fund.
4. Are there any particular countries or sectors within the Asian high yield space which the fund is positive on?
We are still positive on the Indonesian energy /coal sector despite the weakening price trend of thermal coal as Indonesian coal miners are lower cost producers compared to their Australian or US peers. For example, the average cash costs for US miners are in the US$70-75 per tonne range while Indonesian miners' cash cost range between US$35-45 per tonne.
5. On the other hand, are there any investment ideas the fund is not so keen to pursue?
We are currently still cautious about Chinese industrials due to short operating track records and potential corporate governance concerns.
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