This year, with asset performance across emerging markets disappointing bulls, LGT, which manages the fund, says it’s shunning popular trades like Mexico or Egypt and is instead looking to take positions in local debt of nations that aren’t in any benchmark indexes. — Bloomberg
LONDON: The US$85bil (RM378bil) firm owned by Liechtenstein’s royal family is sending its cash well off the beaten path to Armenia, Georgia and Angola, where it sees local debt outperforming more popular emerging markets.
Headquartered in Pfaeffikon, Switzerland and fully owned by the Princely House of Liechtenstein, LGT Capital Partners set up its emerging-market and frontier bond funds in 2021 and oversees investments from institutional clients alongside the family. The following year, its local debt fund outperformed 99% of peers, beating them on average by 19 percentage points, according to Bloomberg data tracking about 5,000 emerging-market bond funds.
This year, with asset performance across emerging markets disappointing bulls, LGT says it’s shunning popular trades like Mexico or Egypt and is instead looking to take positions in local debt of nations that aren’t in any benchmark indexes.
“One of the secrets of our performance is we try to be invested in markets, which are not crowded,” Jetro Siekkinen, the firm’s head of emerging-market fixed income, said in an interview.
“Every single manager in the world – more or less – in the emerging market space is investing in exactly the same instruments.”
The further-flung, smaller markets tend to be driven by more country-specific sets of risks and potential rewards than the bigger countries, where investments are more sensitive to broad changes in global risk sentiment, he said.
That gives investors with some courage and local knowledge an edge, as well as insulation against losses driven by external shocks, the firm argues.
“In a case of higher uncertainty, like last year, there were no foreigners who would be running away from the market,” Siekkinen said.
“These countries are purely driven by what we call idiosyncratic country-specific drivers.”
He pointed at the currency performances of his top bets in the exotic space: the Armenian dram up 25%, the best performance among about 70 exotic currencies tracked by Bloomberg over the past four quarters; and the Georgian lari, up more than 20%. — Bloomberg
