Principal Asset Management launches EMD solution to Australian wholesale investors as market conditions drive strong demand

Damien Buchet

The Finisterre Emerging Markets Debt Total Return Strategy (Strategy), managed by Principal Finisterre, is now available to wholesale investors in Australia, capitalising on increased interest in emerging market debt.

The fund* which follows Finisterre’s EMD Total Return Strategy has received a coveted ‘recommended’ rating from Zenith. The Strategy’s total return approach, marked by active investment management and monitoring, devoid of index constraints, distinguishes it from conventional emerging market debt strategies.

Damien Buchet, Chief Investment Officer of Principal Finisterre, highlights the surge in investor interest, fuelled by positive market developments such as 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,” Mr Buchet said.

He also noted that there is a limited number of investment managers offering EMD solutions to Australian wholesale investors, placing the firm in a strong position as investor demand for emerging market debt continues to increase.

“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,” Mr Buchet 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.”

“Australian investors could benefit when investing in emerging markets as the Australian Dollar has a natural correlation with local currencies in regions such as Latin America and Africa and is less impacted by the United States Dollar, which can help bolster returns while mitigating risk.”

“We invest based on our convictions and use all of the levers available when allocating capital including reviewing income opportunities, beta timing, alpha generation and the need for cash and defensive assets. This allows us to respond quickly to market changes such as elections and monetary policy shifts.”

Mr Buchet added, “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.”

The Finisterre Emerging Markets Debt Total Return Strategy is managed by Principal Finisterre, a boutique firm owned by Principal Asset Management and is only available to wholesale and institutional investors.

*For wholesale investors only