Our Emerging Market Bonds investment strategy seeks to preserve and create wealth by investing in a diversified portfolio of bonds of quality emerging market businesses with the objective of producing long-term returns.
The Stern family has been an active investor in emerging markets for generations. In the nineteenth century, the Stern family and its banks help to found and were shareholders in important banks that have prevailed until today, like Garanti Bank in Turkey or Banamex in Mexico. Stern family banks in Paris, London and Frankfurt issued bonds in Europe for companies from many countries. The family also had important investments in one of the key industries of the largest emerging market of the time, railways in the United States.
In more recent times, J. Stern & Co. has invested directly in emerging market bonds as part of its fixed income investments, based on its in-house investment research and analysis and seeking quality and value irrespective of the emerging market nature of the geographies.
In particular, our Emerging Market Bond strategy pursues the following objectives:
- Target a total return of 6-8%, primary from income yield
- Flexible, risk averse investment approach
- Actual risk much lower than perceived risk
- Rigorous selection process; typical portfolio 20-25 holdings from watch list of more than 150 companies
- Bonds US$-denominated, range of credit ratings B- to BBB+
- Typically 60% corporate bonds, 40% Government/ quasi-Government
- Average duration below five years to limit volatility and exposure to macro-economic risks
- Minimize turnover to reduce frictional costs including a preference to hold bonds to maturity
J. Stern & Co. offers the Emerging Markets Bond strategy in bespoke portfolio accounts.