Principal launches EMD fund

Principal Global Investors has launched a total return emerging market debt (EMD) fund, managed by emerging market specialist Finisterre Capital.

The Finisterre Emerging Market Debt Total Return fund was designed to meet the needs of income-orientated institutional investors by delivering income and capital gains and limiting drawdowns in volatile market conditions.

It sought to offer institutional investors more than 90% of emerging market debt (EMD) market upside for around half its volatility and less than 50% of its downside and would add diversification to a core fixed income allocation.

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It also hedged 100% of the hard US dollar currency exposure while leaving active local currency exposures unhedged versus the Australian dollar. This allowed local investors to benefit from the Australian dollar’s positive correlation with emerging market currencies with the added protection against volatility associated with unwanted US dollar risk.

Damien Buchet, chief investment officer for Finisterre Capital, said: “With this new fund, we are addressing the needs of the Australian institutional marketplace that sees EMD as an attractive investment. Emerging economies have coped with the pandemic reasonably well and we remain convinced that the role of EMD in investor portfolios is set to expand in the coming years”.

Vision Super chief investment officer, Michael Wyrsch, said: “We are excited by the opportunity and are looking forward to a long and productive partnership with Principal and Finisterre”.


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