Ashmore Introduces Emerging Market High Yield Fund

October 15, 2007 ( - Plan sponsors looking for an innovative alternative asset class now have access to a global emerging market high yield fund.

Ashmore Investment Management Limited (‘Ashmore’), a specialist emerging markets asset manager, has today announced the availability of a new fund for a new asset class suitable for institutional investors – the Ashmore Emerging Market Corporate High Yield Fund (“AEMCHY”).   

According to a press release, Ashmore believes this fund – a global emerging market fund specializing in a wide range of mostly debt instruments from corporate issuers – is the first of its kind.   

AEMCHY – which will offer monthly redemptions, with a 90-day notice – will invest in conventional corporate bond issues, but the majority of transactions build on Ashmore’s experience, expertise, and network in these markets.   As a result transactions can be tailored to Ashmore’s specifications and many are originated by Ashmore.   The firm claims that those transactions can offer higher yields than the conventional markets, better security, and with additional equity upside.   Ashmore has been active in this space for some time, with over $1 billion invested in the strategy across a number of existing fund products and accounts, according to a press release.   

In an interview with PLANSPONSOR , Dr. Jerome Booth, the Head of Research for Ashmore Investment Management Ltd., noted that corporate issuance from emerging markets has grown strongly in the last few years.   Moreover, the potential investor base not only includes traditional emerging debt investors but also a range of developed world credit investors including banks and institutional investors.   He says that the asset class can offer investors a risk return profile distinct from other segments of emerging market fixed income.

The recent concerns about subprime investments create another opportunity, says Booth.   He notes that the typical emerging market today has strong reserves (and collectively they are net creditors), and have fiscal and current account surpluses. Fiscal policy is prudent and monetary policy much improved - a combination that has rendered not only low inflation, but the stability for private sectors to make long-term domestic investment decisions, he says.   Further, he notes that the external demand for emerging market external debt is not being met by sovereign issuance, and this has complemented growing domestic pools of capital looking for local fixed income investments.

Ashmore, which started as a spin-off from ANZ Bank in 1999 with less than $1 billion in assets under management, is now a publicly-traded (LSE) company with more than $32 billion under management.   Ashmore's flagship EMLIP (Emerging Markets Liquid Investment Portfolio), launched in 1992, has roughly $5.5 billion in assets.   Booth says that institutional investors will be increasing their allocations in Emerging Markets from 10 to 30 % soon, and eventually up to 50%.

While Ashmore's current institutional client base is dominated by public funds, both state and municipal governments, Booth says that the response to the fund has been robust from both private sector and public pension funds.   The firm has 65 investment professionals, all based in London.

In a press release, Booth notes that "Since the US/European credit crunch, spreads on the conventional EM corporate bond issues have risen by 300-400bp making that segment more attractive.   Also, companies which might have traditionally gone to banks for financing are coming to us instead a bit more.   On top of double digit yields we can often add equity upside too, for instance in a company which requires pre-IPO finance."

Mark Coombs, Ashmore's Managing Director, said: "As Ashmore grows the intention has always been to add more investment themes.   Corporate High Yield is the fifth of these, joining dollar debt, local currency debt, special situations, and public equity."

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