GLOBAL - HSBC Global Asset Management has launched two new funds dedicated to emerging market debt, hoping to capitalise in pension funds growing interest in the asset class.
The two funds, which will focus on Latin American and Asian fixed income, will be open to both institutional and retail investors.
Chris Gower, head of European consultant relations at HSBC Global Asset Management told IPE: "We have seen an important interest from pension funds for emerging market products over the past five years.
"They are looking to invest in growth assets and Latin America as well as Asia are two areas where we find high yield return and an important growth in GDP."
The HSBC GIF Latin American Local Debt fund will invest mainly in a portfolio of investment grade and non-investment grade securities issued by governments and corporations in the region.
The fund is benchmarked against the JP Morgan's GBI EM Global Latin America index, which comprises 55% Brazil, 35% Mexico, 7% Colombia and 3% Peru, and will hold between 20 and 50 holdings.
The fund manager, Octavio Ferreira, said: "The opportunity in the Latin American debt space is growing and we believe that we can capture this within a dedicated fund structure as demand for the asset class increases.
"We believe that superior risk-adjusted returns can be generated by a disciplined investment process, based upon a long term, multi-asset approach."
HSBC Global Asset Management has also launched the HSBC GIF Asian Currencies Bond fund that will invest in a portfolio of Asian fixed income, including investment grade and non-investment grade securities, issued by governments and corporations.
The portfolio will be denominated in both Asian local currencies and US dollars.
Cecilia Chan, chief investment officer for fixed income, Asia-Pacific and manager of the fund, said: "Relatively strong GDP growth rates continue to attract foreign direct investment, which combines with sound economic fundamentals to strengthen local currencies and provide attractive opportunities in Asian fixed income markets.
She added: "The market for emerging East Asian currency debt was valued at $4.6trn (€3.1trn) during the first quarter of 2010 and grew at an annual rate of 17%.
"Allocations to Asian local-currency debt have increased this year as investors seek higher yields than those available in the U.S. and Europe, where interest rates are at record low."
Recently, leading executives interviewed in IPE's Top 400 Asset Managers 2011 survey said European pension funds' allocation to emerging markets remained too low.
The interviewees argued pension funds should raise their allocation to the asset class to at least 20%, focussing on areas from emerging market debt to equities and alternatives such as real estate, infrastructure and private equity.
Gower went on to say: "Pension funds' allocation to emerging markets will depend on the growth in GDP recorded over the next 20 years.
"If growth continues at the same rate as now, an allocation of 20% will still remain low and those investors will need to rethink their strategy."