Standard Life Investments plans double EMD fund launch

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Standard Life Investments is planning a local currency emerging market debt (EMD) fund and an inflation-linked EMD product for Richard House and his team.

The local currency fund will be targeted at institutional investors and would be a higher volatility mandate than its hard currency products.

House said: ‘[Emerging currencies] is an asset class we are big believers on and we will be launching that type of product in the New Year.'

‘But it’s a very volatile part of the asset class. Obviously you have quite sizeable movements of emerging market FX against hard currencies.’

He added: ‘We do think that over time emerging market currencies will appreciate against a basket of developed market currencies  – the euro, the dollar and the pound. But it’s a more volatile asset class and people do underestimate the volatility that is inherent when you buy local currency products.’

Both funds, which are in the early planning stages, would complement the firm’s first EMD fund launched in October.

The Standard Life Emerging Market Debt fund, available to both retail and institutional investors, aims to deliver income plus some capital growth. It does not target a specific yield, although it offered a yield of around 4.7% at launch.

House and his team hold sovereign debt denominated in dollars in the fund, and it is benchmarked against the JP Morgan EMBI Global Diversified index.

SLI said the asset class also has a diversified investment universe of over 50 countries and now constitutes around 12% of the global bond market.