ING IM’s Asian Debt Local Bond Fund reaches USD100m in AUM
The ING Asian Debt Local Bond Fund, which launched in February this year, has achieved over USD100m in AUM following strong inflows from institutional clients.
Rob Drijkoningen (pictured), head of global emerging markets, ING IM, says: “Asia is a well-known success story with exceptionally strong fundamentals positioning it well for the future. Government issues dominate Asian local bonds and accordingly fiscal dynamics are extremely important to the asset class.
“Low fiscal deficits are the norm in the region, whilst they are the exception in the developed economies. Furthermore, Asian banks have ample liquidity, loan to deposit ratios are low by international standards and sovereign rating actions in the region have been, and are expected to remain, positive.”
ING IM also remains positive on the appreciation potential of Asian currencies over the medium term. Based on both real and nominal effective exchange rates, Asian currency valuations appear attractive when compared with developed-market currencies. The asset manager observes that an even more simplistic measure pointing to the strength of Asian currencies is the current account surpluses that Asian economies continue to maintain.
Prashant Singh, lead portfolio manager, says: “In terms of diversification, Asian local bonds offer significant diversification value to a portfolio, given their relatively low correlations to other asset classes. Furthermore, numerous country-specific factors such as differences in credit quality and diverse exchange rate policies contribute to the existence of a considerable amount of heterogeneity that can be exploited within the local bond asset class itself.”
With regard returns, ING IM notes that Asian local bonds have historically shown an attractive return when compared with other assets classes, including equities, and these returns have been accompanied by relatively low volatility.
Drijkoningen says: “We believe that the region’s long term significance cannot be ignored. The relatively low offshore involvement in the regional local bond universe is not commensurate with the strengths detailed above. Asian bond markets have grown significantly since the 1997 Asian financial crisis, and with more corporations looking to issue an increasing amount of debt in their local currencies, we reasonably expect continued growth of the asset class supported by investor demand.
“It is no surprise that the Asia excluding Japan region has become the world’s fourth largest bond market.”
In July 2012, the ING Asian Debt team was awarded a EUR80m mandate from a German institutional client.
As at 30 June 2012, the ING Asian Debt team manages USD5.1bn in Asian debt assets.
- Special Reports