ING IM’s Rob Drijkoningen (pictured) has turned his attentions to FX opportunities as he reduces duration and adopts a cautious stance across the firm’s emerging market debt fund range.
The former Citywire AA-rated manager, who is co-head of emerging market debt for the Dutch firm, said he had placed an emphasis on higher yielding segments across a number of the firm’s EMD strategies.
The most notable changes revealed by Drijkoningen in his latest market update have seen the EMD unit reduce duration in Raoul Luttik’s ING (L) Renta Emerging Markets Debt Local Currency fund.
This is as well as adding to currency exposure in both Luttik’s strategy and Drijkoningen’s own ING (L) Patrimonial Emerging Markets Debt Opportunites fund.
He said: ‘We reduced our duration because when the cyclical movements in the global markets are picking up there is a risk that yields will rise. So we decided to reduce the risk on that side.’
‘On the other side, we decided to increase the FX risk. We have been buying currencies in Asia, Latin America, as well as central Europe, which have added to the risk profile. So that is currencies like the rouble, the Korean won and the Brazilian won.’
‘Meanwhile, in the EMD Opportunities fund, we have added to the FX exposure as well. This is because as the global cycle is improving FX is likely to take advantage of that.’
He said: ‘In the corporate strategy we have been taking advantage of a huge amount of paper coming to the market - that has provided a lot of opportunities. We have also sold a lot of higher grade countries, which have tightened too much.’
Drijkoningen, who has been a vocal commentator on the growth of EMD as an asset class, said he does anticipate further expansion in the coming year. However, he did offer a more cautious outlook than previously.
‘I would say, overall, we think the market will be less buoyant but we are still positive,’ he said.
Over the past 12 months, the ING (L) Patrimonial EMD Opportunities Fund has returned 10.29%. This compares to its Citywire benchmark, the Barclays EM Local Cur Govt – 10% Country Cap TR, which has risen 7.01% over this period.