Legal & General Investment Management (LGIM) has set up an emerging market debt absolute return bond fund for institutional and semi-institutional investors in the German-speaking DACH region in partnership with Universal Investment.

The fund, a Luxembourg SICAV, is initially registered for distribution in Germany, to then be registered in Austria and Switzerland, too.

“This is the first step of our strategic partnership [with Universal Investment] and is part of our growth plans in the DACH region and wider Europe,” Volker Kurr, head of Europe, institutional at LGIM told IPE.

He said the emerging market debt fund has “already received strong interest from institutional investors in Germany”.

LGIM and Universal Investment will expand the partnership by setting up further funds if the first launch proves to be successful, he added.

The fund is actively managed by LGIM’s emerging market debt investment team, and is based on the firm’s current emerging market absolute return strategy.

The lifespan of the fund is between 2.5 and 4.5 years, with 50-100 holdings and an average credit rating ranging from BB to BBB. Environmental, social and corporate governance (ESG) criteria are integrated at country and company levels, LGIM said.

The fund will actively invest “across the full emerging-market debt universe”, focusing on total returns, LGIM said. It can invest in credit default swaps to reduce volatility, it added.

Uday Patnaik, head of emerging markets debt and fund manager at LGIM, said that the strategy invests across all asset classes within the emerging-market debt spectrum, while offering downside protection.

“Through its ability to invest actively across the broad investment universe, the fund can be positioned to aim to achieve better risk-adjusted returns than benchmark-constrained peers,” he added.

Katja Mueller, chief customer officer at Universal Investment, said the fund service platform would “not only support LGIM in administration, but also in actively selling its strategy to institutional investors in German-speaking countries”.

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