Please read the following important information for First State Asian Bond Fund
• The Fund invests primarily in debt securities of Asian government and corporates organised, headquartered or having their primary business operations in Asia.
• The Fund’s investments may be concentrated in a single or small numbers of Asian countries which may have higher volatility or greater loss of capital than more diversified portfolios.
• The Fund invests in emerging markets which may have increased risks than developed markets including liquidity risk, currency risk/control, political and economic uncertainties, high degree of volatility, settlement risk and custody risk.
• The Fund invests in sovereign debt securities which are exposed to political, social and economic risks.
• The Fund invests in debt/fixed income securities which may be subject to credit, interest rate, currency and credit rating reliability risks which would negatively affect its value. Investment grade securities may be subject to risk of being downgraded and the value of the Fund may be adversely affected. The Fund may invest in below investment grade, unrated debt securities which exposes to greater volatility risk, default risk and price changes due to change in the issuer's creditworthiness.
• The Fund may use FDIs for hedging and efficient portfolio management purposes, which may subject the Fund to additional liquidity, valuation, counterparty and over the counter transaction risks.
• For certain share classes, the Fund may at its discretion pay dividend out of capital or pay fees and expenses out of capital to increase distributable income and effectively a distribution out of capital. This amounts to a return or withdrawal of your original investment or from any capital gains attributable to that, and may result in an immediate decrease of NAV per share.
• It is possible that a part or entire value of your investment could be lost. You should not base your investment decision solely on this document. Please read the offering document including risk factors for details.
Prices & performance
Show fund factsheets & data
Source: Lipper, Nav-Nav (with dividend reinvested where applicable)
Acc represents share class with dividends accumulated. M Dist represents share class with monthly distribution of dividends. H Dist represents share class with half-yearly distribution of dividends. Q Dist represents share class with quarterly distribution of dividends. Dividends are not guaranteed and may be paid out of capital. All prices are for indication only. For detail, please refer to the Fund’s factsheet for further details including investment objective & strategy, asset allocation, top 10 holdings, comparison with benchmark (if any) and disclosure.
With effect from 22 September 2020, First State Investments was rebranded to First Sentier Investors. The names of the funds were also rebranded, please view the full list of the fund name changes: Hong Kong Unit Trust (HKUT) / First Sentier Investors Global Umbrella Fund (VCC).
Opportunity within fast growing and diverse economies
Having witnessed an unrivalled transformation and expansion over the last decade, we believe Asian Fixed Income markets are set to become the economic engine of the world.
Investors have the opportunity to benefit from this increasingly diversified asset class, with ample liquidity and volatility akin to that of developed markets.
A proven and differentiated investment philosophy:
We consider risk management as key to our philosophy, and one that permeates every stage of our investment process. We follow a prudent investment approach which aims to achieve consistent income generation and risk-adjusted returns. Country selection reflects the output of our Asian markets assessment which includes quantitative and qualitative analysis. Duration and yield curve management reflect our thematic, factor based approach.
Consistent long-term performance track record:
Positive risk-adjusted returns generated over 3-5 year time horizons.
World-class ESG integration:
We have a vigorous Environmental, Social and Governance (ESG) process that is built in at both the company and product level. More importantly, ESG risk factors are an important consideration in the assignment of credit ratings on individual issuers.
Multi-dimensional credit research:
Credit research focuses on assessing credit risk and identifying deteriorating issuers. Our analysis considers a variety of risk dimensions, enabling significant breadth.
All positions in our portfolio are backed by research
We are stewards of our clients’ capital, and we take that very seriously.
We believe that successful fixed income investing requires a deep focus on risk management, given the inherently asymmetric nature of the investments. For this reason every position in the portfolio is backed by in-depth research. Identifying rating migration and defaults is as important as finding relative value opportunities.
PK Founder Group – steering clear of a default
China-based diversified conglomerate PK Founder Group operates across IT, healthcare and pharmaceuticals, bulk commodities trading, education and training.
PK Founder Group did not have an external rating by international rating agencies, which is quite common among domestic companies in China. When the issuer first came to the international bond market in 2017 unrated, we assigned an ‘investment grade’ rating, with a view that there would be a high probability of support from the Government of China, despite the company’s relatively weak standalone financials. The bond issue was also attractively valued relative to other state-owned Chinese university issuers at the time.
After several interactions with the management, we concluded that the USD bond proceeds were being pledged against the company’s onshore borrowing facilities. This alarmed us as management was not transparent with regards to the structural subordination for offshore investors. The group quickly became a commercialised conglomerate, expanding into non-strategic mandates such as property. In our view, this severely weakened the likelihood of future government support.
The group’s total debt surged by >USD20 billion by end-FY18, (+31% year-on-year increase), and five additional USD bonds (totalling US$1 billion) were issued during the first six months of 2019. Concern were raised after meeting with management, and analysing the latest financials. Positions in our credit portfolios were trimmed and subsequently sold completely. The internal credit rating was subsequently downgraded into the ‘high yield’ category. Following the disposal, the bonds depreciated sharply. In December 2019, the group missed a bond repayment. This ‘default’ resulted in a very sharp deterioration in the value of the bonds.
Source: First Sentier Investors as at 31 August 2020.
Disclaimer: Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of First Sentier Investors’ portfolios at a certain point in time, and the holdings may change over time.
Options and Opportunity
We stand at a juncture where we believe Asian Fixed Income should be considered a strategic and complementary allocation when constructing a portfolio. Our diverse clients around the world have a wide variety of investment goals and challenges we like to help them solve.
Offering our clients diversification within their portfolios:
- To existing Fixed Income exposure
- To Sovereign Emerging Markets exposure
- To Investment Grade developed market exposure
Offering our clients the potential for a stable income stream
Giving clients exposure to corporate credit companies, driving global economic growth
Our corporate RI strategy is based upon three strategic pillars of quality, stewardship and engagement.
Our approach to investing is driven by a commitment to providing the best possible outcomes over the long term for our clients. The team considers ESG factors relative to their potential impact on financial performance. We believe that ESG issues have a significant bearing on risk.