NEUBERGER BERMAN
Emerging Markets Debt
Short Duration Strategy
Aims to provide a stable and attractive income
•
Average investment-grade rating
•
Large team with long-term experience managing
emerging markets debt
•
FOR PROFESSIONAL CLIENT USE ONLY.
Why Emerging
Markets Debt?
As developed economies struggle with the
burdens of debt and slow growth, emerging
economies continue their catch up.
Why Short Duration Emerging Markets Debt?
We believe many investors will find short duration emerging markets debt attractive in
today’s market environment.
INTEREST RATES ARE AT RISK OF RISING AS WE BELIEVE BASE RATES HAVE BOTTOMED
Emerging markets have lower levels of
government debt than developed markets, and
have maintained balance of payment surpluses.
These markets have attractive demographics
and a growing middle class, which makes them
an obvious target for investment.
• Offer significant yield advantage over
developed market bonds,
• Are an underresearched and underreported
universe, which generally creates additional
return potential.
Europe Base Rate
5.0%
• Are at an earlier stage of economic
development, and therefore have the
potential to grow rapidly,
• Offer investors a way to diversify their
portfolios across a wide range of economies,
currencies, yield curves, industries and industry
sectors, and
US Base Rate
6.0%
Interest Rate
Emerging markets:
UK Base Rate
7.0%
4.0%
3.0%
2.0%
1.0%
0.0%
‘98 ‘99
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘11
‘12
‘13
‘14
Sources: FactSet, Barclays POINT. Data as of December 31, 2014.
SHORT DURATION EMERGING MARKETS DEBT OFFERS AN ATTRACTIVE YIELD PER UNIT OF
DURATION VS. THE FULL MARKET AND DEVELOPED MARKET BONDS
7%
• Less affected by the negative impact of rising
rates on bond prices.
• Less volatile than longer duration bonds, as
returns tend to come from coupon payments
rather than price appreciation.
EMD LC
6%
EMD HC
EMD Corp
5%
Yield to Maturity
Short Duration Bonds
Tend To Be…
4%
NB SD EMD
3%
US IG Corp
US Agg
2%
US Treasury
1%
TIPS
0%
0
1
2
3
4
5
6
7
8
9
Duration (Years)
Sources: FactSet, Barclays POINT . All data for May 25, 2015. Benchmarks used were JPMorgan EMBI Global Diversified Index,
JPMorgan GBI EM Global Diversified Index, JPMorgan CEMBI Diversified Index, Barclays US Aggregate Index, Barclays US
Interim Treasury, Barclays US Aggregate Credit Corporate Investment Grade Index, Barclays US Treasury Inflation Protected
Notes (TIPS), and the Neuberger Berman Short Duration Emerging Market Debt Fund. Indexes are unmanaged and are
not available for direct investments. Investing entails risks, including possible loss of principal. Past performance is not
necessarily indicative of future results. As with any investment, there is the possibility of profit as well as the risk of loss.
SHORT DURATION EMERGING MARKET DEBT SHOWS LOW CORRELATION WITH US TREASURY
RATES, GIVING POSITIVE RETURNS IN BOTH UP AND DOWN SCENARIOS
2.0%
Quarterly Short Duration EMD Correlation
with US Treasury movement
1.5%
2010/1–2013/12
-0.36
1.0%
0.5%
0.0%
FOR PROFESSIONAL CLIENT USE ONLY.
1.7%
Short Duration average
return when US Treasuries
move up
0.9%
Short Duration average
return when US Treasuries
move down
Sources: JP Morgan and DataStream. Calculation based on quarterly data of the JP Morgan EMBI Global and CEMBI Broad
1–3yr indices, United States Benchmark 10 Year Datastream Government Index.
Our Distinct Approach
Experienced Team*
Our strategy offers an attractive way to take advantage of emerging market spreads
while offering some protection from rising US rates, by focusing on securities with short
duration. We aim to access the potential of emerging markets by investing in a diversified
selection of hard currency sovereign and corporate credits, seeking to generate stable
income and returns with limited volatility.
Neuberger Berman’s emerging markets
debt team is led by Rob Drijkoningen and
Gorky Urquieta, who have 24 and 20 years
of industry experience, respectively.
Our Process
Our team follows a combined top-down and bottom-up approach, incorporating multiple
sources of alpha potential. Being early investors in emerging markets debt, the team
has spent nearly 20 years developing and refining this process. The top-down view
determines the risk taken in the portfolios, while the bottom-up research selects the
underlying investments.
The co-portfolio managers on the short
duration strategy are Bart van der Made, CFA,
Jennifer Gorgoll, CFA and Nish Popat.
Bart, Jennifer and Nish are supported by a
dedicated team of economists and analysts
based in Atlanta, The Hague and Singapore
—spread across three time zones.
Portfolio Managers
FOUR-COMPONENT PROCESS
Incorporates analysis of each country’s:
• Macro economic fundamentals
• ESG Criteria
Rob Drijkoningen
Team primarily relies on Country and
Corporate credit views to narrow down
the investible universe to create a
model portfolio
Country Credit
Analysis
Portfolio Construction,
Target Return, Liquidity,
Duration, Rating Average
Process and
Performance Evaluation
Corporate
Credit Analysis
Global Co-Head of
Emerging Markets Debt Team
25 Years of Industry Experience
Gorky Urquieta
Global Co-Head of
Emerging Markets Debt Team
21 Years of Industry Experience
Team reviews performance and
process to learn and improve
Incorporates analysis of each corporates:
• Financial History & Forecasts
• Industry & Qualitative Factors
• Sector and Issuer Relative Value
• Stress Scenario Analysis
Strategy Characteristics
Investment Objective
To attain a stable income and return by investing in a diversified selection
of Emerging Market Hard Currency Sovereign and Corporate instruments
Target Return
3-Month LIBOR +3%
Investment Style
Aims to provide a competitive yield with limited volatility by investing in
a short duration portfolio of emerging markets sovereign and corporate
debt. The portfolio managers aim to avoid issuer defaults through thorough
fundamental analysis.
Investment Universe
Emerging Markets Sovereign, Quasi-Sovereign, Sub-Sovereign,
Supranational and Corporate Debt—largely but not exclusively from
the universe of the EMBI Global and CEMBI Broad Indices
Fund Rating
Average investment-grade rating
Duration
2 +/- 0.75 years
Instruments
Eurobonds, Cash and Money Market instruments, bonds with warrants,
senior and subordinated bonds, sukuks, and convertibles
Allocation
A mixture of Sovereign, Quasi-Sovereign and EM Corporate exposures
depending on relative value and available opportunities with a low
turn-over mindset
*As of December 31, 2014.
Jennifer Gorgoll, CFA
Co-Lead Portfolio Manager
16 Years of Industry Experience
Bart van der Made, CFA
Co-Lead Portfolio Manager
18 Years of Industry Experience
Nish Popat
Co-Lead Portfolio Manager
22 Years of Industry Experience
FOR PROFESSIONAL CLIENT USE ONLY.
Talk to Neuberger Berman
For further information, please contact our Client Services Team in Europe
at +44 (0) 20 3214 9077 or Asia at +852 3664 8813.
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The value and the income produced by the proposed strategy may be adversely affected by exchange rates, interest rates or other factors, so that an investor may get back less
than he invested. Past performance is not necessarily indicative of future results.
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FOR PROFESSIONAL CLIENT USE ONLY.
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