Nomura Asian Bonds Fonds

Asset Class

The “Asian Local Currency Bonds” asset class offers an attractive mix of performance drivers covering all stages of the business cycle:

Asia: This region features “higher quality” yields (attractive local government bond yields with relatively high ratings) combined with comparatively sound economic fundamentals.

Local Currency: The FX component tends to benefit – similar to equities – from improving growth prospects during an economic expansion and boom phase (enabling participation in the “EM growth story”).

Bonds: The interest rate/duration component tends to benefit from reduced growth prospects duaring an economic contraction and recession phase, when central banks cut interest rates (active FX management is essential in this phase).

Investment Approach

Quality-conscious: Our philosophy “value instead of carry” emphasises the management of FX and interest rate risk, with less focus on credit risk; our total return approach seeks to generate a balanced value-added from interest income, capital appreciation and currency management.

Concentrate and diversify: Our high conviction, macro-based portfolio concentrates on a selection of major (benchmark) markets; diversification is added by exploiting less correlated risk opportunities from the off-benchmark parts of our universe.

Dynamic, contrarian risk capital allocation:  We screen for and distribute capital flexibly between tactical and strategic investment ideas. We seek to avoid allocating risk capital pro-cyclically and to minimize uncompensated and unintended risks. The use of derivatives is essential to our approach.

Holistic risk management: Our Sharpe ratio-oriented risk management aims to smooth volatility and drawdown to achieve an optimal risk-adjusted return. Essential tools are long/short FX strategies and active beta and cash management.

Team oriented approach: Our investment team consisting of 3 experienced investment professionals divides up the universe by risk drivers (EM rates, EM FX, global factors) and not by regions for top-down analysis and bottom-up idea generation.

Target: Outperformance over the cycle versus peers and with a risk-adjusted return above the benchmark.

Investment Strategy

We offer an Asian local currency bond product

• with active currency management vs. EUR.
• with a comparatively high average rating (currently ~ A), an attractive yield to maturity (currently 3-4%) and a moderate volatility profile (historically about 8% p.a.).
• which invests in local currency bonds issued by governments, government agencies quasi-sovereign entities and supranational organisations (hard currency bonds and corporates may be added opportunistically).
• which offers potential for diversification within a regional focus on Asia.
• Benchmark: J.P. Morgan JADE Broad Unhedged EUR* (Ticker: JALBCOUE Index); coverage: 8 developed and emerging markets in Asia.

This regional strategy can offer a lower volatility (and higher rated) alternative to global strategies, as Asia has historically exhibited a more moderate volatility profile compared to other EM regions.

*until 31.03.2019 iBoxx Asian Local Bond Index, from 01.04.2019 J.P. Morgan JADE Broad Unhedged EUR

Potential Significant Risks

Emerging markets or less developed countries may face more political, economic or structural challenges than developed countries.

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Fund	ISIN	Annual Report	Semi-annual Report	Fact Sheet	Sales Prospectus	PRIIPs KIDs (German)
Class R EUR	DE0008484429
Class I EUR	DE000A2DHSZ2
Class C EUR	DE000A2DHS00

As per January 2023

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