State Street Global Advisors has launched a new multi-factor premia emerging market bond fund for investors in the UK and several other European countries.
The fund’s strategy aims to give investors exposure to emerging market local currency debt, and to earn compensation from taking sovereign credit risk. It will employ a systematic, rules-based approach to capture quality factor premia from emerging market sovereigns, using six fundamental factors. SSGA global head of systematic beta fixed income, Ritirupa Samanta, commented: “Emerging markets generally form a significant allocation for most institutional investors, offering attractive yields and valuations in the current market environment. Investors remain mindful, however, of sovereign credit risk, or even crises, as has been evident in countries such as Russia and Brazil. Our innovative approach and strategy helps compensate the risks that investors in emerging markets are facing by extracting the sovereign credit premium, which is a significant driver of returns.”
Samanta added that using smart beta strategies for EM sovereign credit risk premia could give exposure to specific factors which generate risk and return. In addition, smart beta strategies are seen as cost-efficient and transparent. The UCITS fund will be domiciled in Ireland and registered in the UK, Germany, Ireland, France and the Netherlands.