Hesinki / Frankfurt am Main, November 30 2017
Making this strategy available to a broader European market is a natural next step for the Helsinki based manager after running similar strategies extremely successful in the Nordics for more than ten years. The sub-fund is launched under the already existing umbrella structure "UI".
Aktia's approach to invest in frontier market sovereign risk is based on a philosophy that has not been altered over the past eleven years. "We are focusing on countries with long-term positive fundamental development, high real yields and low FX volatility combinded with an environment, which shows a declining inflation pressure” says Jetro Siekkinen, Deputy Managing Director and Head of Portfolio Management at Aktia Asset Management. The sub-fund Aktia EM Frontier Bond+ invests purely in local currency, making it truly a unique product. "Investing in local currency in these markets is really where we see the best value. There is significant catch-up potential in the FX valuations that has not been realized yet after the last devaluation cycle, which was the most severe since the financial crisis 2008,” says Siekkinen.
The investment strategy is based on an active management approach, fund positions are deliberately not related to the benchmark. The fund managers also invest in a wide range of financial instruments such as government securities, T-Bills, inflation-linked bonds, Supranational AAA issuers and FX derivatives. The sub-fund’s investment universe comprise up to 100 countries whereas the benchmark index is just based on 15 countries.
"Our decisive advantage is our broad positioning compared to our competitors. This gives us the opportunity to avoid investing in countries that have negative tendencies in terms of both cyclical and social and political developments", says Siekkinen.
The investment strategy is macro-economically and fundamentally driven combined with a long-term investment horizon. Investments are identified through a qualitative and quantitative decision-making process and are well diversified. The fund follows an absolute return approach, taking into account both inflation expectations and real yields without being too close to the benchmark index. The aim of the strategy is to generate a higher risk-adjusted total return with low exchange rate volatility through diversification and off-benchmark betting.
The economic activity of frontier markets will remain on an improving trajectory due to accelerating global trade, competitive currencies and decreasing commodity prices. Over the course of the year, the core central banks Fed and ECB as well as geopolitical risks have caused some short-term uncertainty, but return outlook is still very attractive as yield levels are high, fundamentals are improving and moderating inflation pressures enable looser monetary policy. In addition, there has been positive development in economic reforms. In the longer term frontier market currencies seem to be undervalued. In the short term, high nominal and real yield levels offer protection against currency volatility.
First sub-fund of a new emerging markets fixed income fund family
Investment strategy on sovereign risk in local currency
Return outlook for Emerging Markets still very attractive
Portfolio manager: Aktia Asset Management Ltd, Helsinki / Finland
Management company: Universal-Investment-Luxembourg S.A., Grevenmacher / Luxembourg
Fund name / SICAV: UI
Sub-fund: Aktia EM Frontier Bond+
Fund category: Bonds
Fund currency of share class: EUR
Benchmark: JP Morgan Government Bond Index- Emerging Markets Diversified, GBI-EM Diversified
Performance fee: –
Appropriation of earnings: Distributing
Ongoing charges (estimate): 1.88% p.a.
Initial minimum investment: EUR 100
Subscription fee: Up to 3%
Appropriation of earnings: Accumulating
Ongoing charges (estimate): 1.43% p.a.
Initial minimum investment: EUR 100
Aktia Asset Management Ltd. is a Finnish fund manager within the Aktia Bank Group. Aktia has a total of EUR 12bn in assets under management. Majority stakeholder is Aktia Bank, with a history dating back to 1825. Aktia Bank has a customer base of around 300,000 and has been listed on the Nasdaq OMX Helsinki since 2009. Aktia Bank holds majority of the Aktia AM stock. The rest of the shares are held by key staff. Aktia AM has 30 staff, among which a highly successful emerging markets fixed income team that focuses on EM sovereign risk (Government bonds, AAA supranationals, FX strategies) and is headed by Jetro Siekkinen. The company has won several acknowledgements for its investment performance, among which Morningstar, TNS Prospera, Scandinavian Financial Research SFR and Tell Media. Aktia AM is regulated by the Finnish Financial Supervisory Authority.
More about Aktia Asset Management on www.aktia.com