Berenberg has launched sustainable emerging market debt fund for private investors. The objective of Berenberg Sustainable EM bonds is to generate reasonable and consistent returns from emerging market bonds and to combine them with a clear sustainability dimension.
Berenberg offers the strategy over a total of three tranches, both in US dollars and currency hedged in euros. The fund, managed by Frederic Waterstraat, was launched on 31 January 2018 and has recently become available to private investors.
“The current yield of emerging market investments is usually much higher than that of developed markets. Similarly, fundamental strength, liquidity and market depth are steadily increasing in emerging markets. By now, this segment has matured to the point that it ensures a broad diversification at all times and it is also possible to set sustainability criteria, “says fund manager Waterstraat, describing the four key factors of the investment strategy.
The aim of the fund is to sustainably improve the relationship between return and risk over traditional emerging market bond funds. The fund management has defined around 40 limit values and exclusion criteria for the investment selection. Thus, for example, bonds issued by authoritarian countries which do not recognise international human rights and environmental agreements or which are considered particularly belligerent are not invested. Likewise, fund management excludes bonds issued by companies that evade responsible corporate governance or are active in controversial business areas such as landmine production.
Subsequent to the exclusion process, the bonds from the investment universe are valued according to a best-in-class approach, whereby the management takes into account not only creditworthiness but also dedicated sustainability ratings and thus classifies states and companies according to ecological, ethical and social criteria.
There is also an in-depth analysis of the fundamentals. Suitable government and corporate bonds then flow into the quantitative Berenberg emerging markets bonds selection process, which Berenberg has been offering as a mutual fund solution since October 2010. In addition to a systematic portfolio orientation based on a market environment analysis, this process also includes proven quantitative individual title selection and consistent risk management.