Decent growth in the developed world and a dovish tone from central banks has created a sweet spot for higher yielding segments of the bond market.

Emerging market corporate debt in hard currency has had a strong start to 2019 and remains one of our preferred sectors within the riskier parts of the bond market. One of the segments we like is Asian high yield where valuations look attractive after 2018’s weakness.

In this context, investors looking to gain exposure to a portfolio of hard-currency emerging market bonds with a particular focus on Asia may want to take a look at the actively-managed tracker certificate in subscription. It is actively advised directly by the Julius Baer Investment Management Asia Team.

The product pays a fixed coupon of 4.25% p.a. on a quarterly basis (if the cash component is sufficient at the coupon payment date).

The credit rating profile of the notional portfolio is largely made up of investment-grade rated bonds, and the maximum exposure to high-yield bonds is limited to 35%. The average credit rating of the bonds in the notional portfolio will be BBB- and the minimum credit rating of a single bond will be BB-.

The emerging market exposure is capped at 80%, with a considerable allocation to Chinese issuers (max. 40%).

The largest sector allocation is initially expected to be to Asian real estate with a significant allocation to Chinese companies, a segment of the market our fixed income research particularly favours.

The product has a fixed maturity date of 31 March 2023 with a relatively short modified duration of around three years of the notional bond portfolio. As interest rate and credit spread risks decrease to money market levels as maturity approaches, the product is designed to redeem at par at maturity (although no guarantee can be given).