First State’s EMD head piles into Eastern European bonds

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Helene Williamson, the Citywire A-rated manager of the First State Emerging Markets Bond fund, has increased her risk exposure after avoiding the worst of her asset class’s recent sell-off.

‘At the beginning of May we were neutrally positioned,’ Williamson (pictured) told Citywire Global's sister site Wealth Manager. ‘During the month we started to take profits.’

By June her fund was two years underweight its benchmark’s average duration, at which point she decided that the market had become too bearish.

‘We try to identify where the market is pricing in too much good or bad news,’ Williamson said.

She therefore began to reinvest, particularly overweighting central and eastern Europe.

The region now represents 34.1% of her fund, with significant allocations to Poland, Russia and Lithuania on the grounds that growth is returning to these economies as their export markets recover.

Importantly, Williamson has focused on sovereign rather than corporate bonds in the region, noting local governments’ low debt levels; only 0.4% of her portfolio is held in corporate paper.

This positioning has helped Williamson significantly outperform her peer group recently, returning 0.8% in the three months to the end of September compared with an average loss of 2.2% from the Global Bonds sector. Since inception in October 2011, the fund has returned 11.2% against the peer group's 6%.