Focuses on generating total return by investing in mainly USD-denominated fixed income securities issued by sovereigns, quasi-sovereigns, supranationals and companies in the Asian region.
The Asia Credit strategy is one of the key strategies managed by our Asian Fixed Income team at Nikko AM. It focuses on generating total return from both capital appreciation and income by investing in mainly USD-denominated fixed income securities issued by sovereigns, quasi-sovereigns, supranationals and companies in the Asian region. The investment philosophy and strategy of the Asian Fixed Income team is well-tested over time and remains stable.
Our investment process seeks to deliver returns through multiple sources of alpha, utilising both top-down and bottom-up strategies. The research approach utilises our proprietary Fundamental, Valuation and Technical (FVT) framework to distil the top-down and bottom-up perspectives from a multitude of macro-economic factors and issuer- and issue-specific characteristics, to add value within the defined levels of risks and constraints, using both qualitative and quantitative techniques. Most important in our fundamental analysis is our Internal Credit Rating (ICR) model, which has been time and stress tested for its robustness since inception in 2006. Our ICR assesses quantitative and qualitative aspects of each issuer independently of external credit rating agencies. Environmental, Social and Governance (ESG) factors also form an important aspect of the credit analysis. Our proprietary Internal Credit Rating (ICR) model, conceptualised and developed by our Asia Credit team, is the first pillar in our credit research process.
For more details on our investment philosophy, Research and ESG framework and investment team, please visit the Asian Fixed Income strategy page.
Asia is one of the fastest growing regions in the world, a compelling argument to invest in Asian bonds. The growth of Asia ex-Japan economies, underpinned by China’s ascent, has significantly outpaced that of developed economies. In 1998, the region’s share of global gross domestic product (GDP) was 9%, and has since increased to about 45%1, as of May 2022. We expect the depth, breadth and diversity of Asian bond markets to increase further. In our view, fund flows within Asia (a requirement for more diverse funding) and increasing issuer sophistication, are factors that will fuel these characteristics.
Our Asia Credit strategy is one of our flagship fixed income strategies. Since its launch in 2009, the team has accumulated valuable experience from managing the strategy through various market cycles.
Over the years, the ICR has gone through various enhancements (for example, the integration of ESG factors) to ensure that it remains well-aligned to the changes in the investment environment.
With a diverse and growing investment universe in Asian bonds, our highly experienced Fixed Income team manages a wide range of active Asian fixed income portfolios. They are present on the ground and understand the opportunities and risks in Asia. It is our belief that there are great opportunities for specialist investment managers in the dynamic Asian market.
Sub-strategies within the Asia Credit spectrum of the bond market managed by our team include Asia Credit-Investment Grade strategy, Asia High Yield strategy, Composite Asia Credit strategy, Short Duration Asia Credit strategy.
1 World Economics: https://www.worldeconomics.com/Thoughts/The-Future-is-Asian.aspx
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