Union Bancaire Privée (UBP) has expanded its sovereign emerging market fixed income offering with the launch of UBAM – Emerging Markets Frontier Bond.

It is a frontier market strategy fund with the aim to take advantage of the attractive return potential offered by investments in frontier markets.

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The advantage exists due to risk premiums overestimating default probabilities and underestimating recovery values.

Furthermore, frontier markets have grown at pace in the last decade and becoming an important part of emerging market debit and global fixed income. Frontier markets now consist of 35 countries and a $100bn market capitalisation.

In addition, these markets are more diverse than more realise and offer better diversification.

Nicolas Faller, co-CEO of Asset Management and head of institutional sales at UBP, said: “Launching this new strategy enables us to expand our emerging market fixed income offering further and meet growing client demand for innovative solutions that help them both generate yield and diversify their portfolios. In fact, our analysis shows frontier debt to be an effective diversifier to global balanced portfolios. This new fund is therefore particularly attractive for investors as part of their wider asset-allocation considerations.”

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Thomas Christiansen, deputy head of emerging market fixed income at UBP and lead portfolio manager of UBAM – Emerging Markets Frontier Bond, added: “Frontier markets offer a compelling investment opportunity with returns outpacing those on sovereign bonds in broader emerging markets over the long run thanks to their attractive carry*. We expect this long-term positive trend to continue despite the fact that, with the combined effect of a global economic slowdown triggered by the coronavirus and heightened tensions in oil markets, emerging market frontier bonds have been and will likely remain particularly volatile for now. In addition, the recent sell-off provides investors with the opportunity to access these markets at yields that are much higher than they have been in recent years.”

UBAM is currently available in Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden, Singapore, and the United Kingdom.