Ask The Experts: Ageing Population To Drive Asia Fixed Income
Chia Tse Chern, Director and Co-Head for Asia Fixed Income at UOB Asset Management Ltd, shares with Fundsupermart his outlook for the Asian fixed income market as well as the investment strategy behind the United Asian Bond Fund.
What is the outlook for the Asian fixed income space?
- Asian bond market is expected to grow very strongly over the next two decades
- Ageing population will be main reason for the growth due to an increasing emphasis on capital preservation and interest accrual
What kind of risk-return profile can investors expect when investing in Asian fixed income?
- Asian bond market has given investors about 7% returns over the last five years
- Given the current interest rate environment, this is expected to continue
- Asian bond investors can expect a return of about 4 to 5% over the next two to three years
Since the United Asian Bond Fund has a rather flexible mandate, can you tell us a bit more about its strategy and how the investment team selects its holdings?
- Portfolio is managed using a top-down and bottom-up strategy
- Top-down approach involves analysis of major macroeconomic trends, as well as interest rate and credit spread changes in the different countries
- Bottom-up approach consists of a team of analysts who selects companies with strong balance sheets, cash flows and business models
With regards to the fundâs portfolio, how many holdings does the fund have, and how many issuers does it have exposure to?
- Fund typically has about 50 to 60 holdings from 30 to 40 issuers
Is there a maximum exposure the fund can have to a single issuer?
- For high-grade bonds, there is a single issuer limit of 10%
- For high yield bonds, there is a single issuer limit of 5%
What is the fund's approach with regards to currency management?
- Most of the fund's holdings are denominated in USD while the NAV of the fund is denominated in SGD
- Hence, fund places a large emphasis on currency risks
- Fund currently utilises several proprietary foreign exchange models to guide their currency positions
Lastly, what is the latest duration and yield numbers for the United Asian Bond Fund?
- Average duration of the fund is 4.4 years and average yield is 5%
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