Principal launches EM debt fund for Aussie wholesalers

Responding to increasing investor interest in and growing return potential of fixed income emerging market (EM) solutions, Principal Asset Management has opened its Finisterre EM Debt Total Return Strategy to Australian wholesale and institutional investors.

The fund follows Principal Finisterre’s EMD Total Return Strategy, touted as an “all-weather solution” with an “active, unconstrained, adaptive, long-biased, multi-EMD” focus.

Principal notes that the strategy’s total return approach is “marked by active investment management and monitoring, [and] devoid of index constraints”, distinguishing it from conventional EMD strategies.

Damien Buchet, chief investment officer of Principal Finisterre, said the launch of the fund coincides with a period of significant investor interest in emerging market debt, fuelled by “resilient emerging market growth, prudent risk pricing, and easing US financial conditions”.

“Right now, we are a seeing a squeeze in terms of valuations which are positively impacting investors, allowing them to access the benefits of fixed income at potentially higher returns,” he said.

There are also few investment managers offering EMD solutions to Australian wholesale investors, Buchet added.

“Australian wholesale investors are increasing their exposure to overseas assets due to diversification desires, improved access to investment vehicles and heightened returns which now, more than ever before, are creating a highly diversified income stream for global investors,” he said.

“By strategically incorporating EMD, Australian investors gain access to the growth potential of developing nations, providing specialised diversification opportunities and potential long-term returns.”

Buchet also recognised the fund’s capability to weather periods of volatility.

“Any unexpected shock to risk assets would be expected to reverberate through EMD as we saw in volatile periods during 2023 and in particular 2022. However, our total return approach will be well geared to ride out these periods of volatility.”

Principal boasts that its EMD strategy has received a ‘recommended’ rating from Zenith.

Owned by Principal Asset Management, Principal Finisterre is a boutique investment firm specialising in EMD investment.