Stern attitude to EM debt investing

Investment partnership J Stern has launched the Emerging Market Debt Stars Fund that will invest only in the best EM debt available.

That debt is issued by high-quality companies with strong competitive positions, operating in good and growing industries, with predictable cash flows, the financial strength to weather adversity, access to multiple sources of capital, and strong management teams.

It is based on Stern’s EM debt strategy, which has delivered 1.7% pa. outperformance of its benchmark. Up to 31 August 2022 it had outperformed by 2.7% pa.

While EM sovereign debt is linked solely to the economic health of developing economies and inherent political risks, EM corporate debt relies on the credit and the fundamental strength of the underlying companies.

Jean-Yves Chereau, partner, and co-portfolio manager of the Emerging Market Debt Stars Fund, said: “The market repricing we have experienced this year has led to higher yields in fixed-income assets.

“We believe this presents an attractive entry point for long-term investors to buy and hold bonds from companies with solid underlying fundamentals, delivering generous income (and total returns) in an environment where the global outlook is uncertain.”