BlueBay Emerging Market Unconstrained Bond

A unique high conviction fund which offers investors access to BlueBay’s best ideas across the Emerging Market debt universe. The fund is flexible and will invest in both hard and local currency debt and sovereign and corporate EM debt, depending on the best opportunities. The fund can also short or bet against a sovereign, corporate or currency where it has a strong view.

Our opinion

A truly active fund, managed by an exceptionally experienced and well-resourced team. The fund is set up to deliver alpha and historically it has done just that, indicating it has an extremely consistent process. This is a difficult asset class which requires expert understanding across multiple geographies. The team behind this fund have this expertise and it is one of the most impressive we’ve seen in this space.

Fund manager

The fund has three co-managers. Polina Kurdyavko (since June 2016), Anthony Kettle (since December 2017) and Brent David (since January 2021).

Polina is co-head of emerging market debt at BlueBay and the lead portfolio manager on a number of other BlueBay strategies. She joined BlueBay in 2005 from UBS. She previously worked at Alliance Capital as an emerging markets equity analyst. Polina holds an Msc (Hons) in Finance from the Peoples’ Friendship University of Russia. She is a CFA charterholder.

Anthony is a senior portfolio manager. He joined BlueBay in 2006. Prior to joining BlueBay he held a management position at the National Bank of Australia. He holds a Bachelor of Commerce degree from the University of Melbourne and a Graduate Diploma in Applied Finance and Investment from the Australian Securities and Investment Commission. He is a CFA charterholder.

Brent joined BlueBay in March 2014 as a portfolio manager within the emerging markets team. Prior to joining BlueBay, Brent worked for 12 years on the sell-side, for Credit Suisse, Barclays Capital and Deutsche Bank, in emerging markets as a local currency fixed income, rates and FX trader. 

Polina KurdyavkoFund manager

Investment process

The BlueBay fixed income philosophy is grounded in a belief that markets are inefficient and can be exploited. The firm’s investment approach is consistent across their products. There are three pillars to the research process: macro, credit and responsible investment.

The process relies heavily on a wide team of well-resourced investment specialists, with a forensic approach to research. The team has an average of 17 years’ experience. It is split between sovereign and corporate specialists. This fund has a target of cash plus 4-6%. As the fund name suggests, this product is a high conviction portfolio with the flexibility to invest across the EM debt spectrum - ranging from hard to local currency and sovereign to corporate debt, depending on the teams view. The fund does not reference any benchmark.

Outperformance comes from four different sources. The most important of these is sovereign/corporate credit, but it also includes local currency rates, currency and term structure. These components are then broken down even further into granular alpha sources which are all independently analysed by members of the team.

Analysis begins with fundamental scoring for an individual country. This will include a broad analysis of the country’s financial position, incorporating macro and fundamental factors. This leads to a score from -3 to +3. An ESG and political analysis is also incorporated into this framework. These factors are particularly important in emerging markets. The political backdrop is often critical.

Finally, it is backed up by a subjective analysis and significant on the ground due diligence. The team will visit, sovereigns, regulators, opposition parties, non-government organisations and corporates to build up a picture and create a ‘mosaic theory’ approach to their research. The total research is combined to come up with an overall conviction score ranging from -3 to +3. This is a very high conviction fund and they are not afraid to take short positions if they think it will add alpha. The team can take negative views on FX, credit or duration.

ESG

ESG - Integrated  

BlueBay has been a member of the PRI (Principles for Responsible Investment) since 2013. ESG is incorporated into BlueBay’s process. The fund was reclassified from SFDR Article 6 to 8 from 1 April 2022. The fund now excludes controversial weapons, tobacco, thermal coal mining, oil sands and controversial jurisdictions. BlueBay has a unique ESG evaluation framework which combines internal and third party ESG data. The ESG analysis leads to two distinct ESG scores. A fundamental ESG risk rating (a scale from very high risk to very low risk) and an investment ESG score (which ranges from -3 to +3).

Risk

As the name suggests, this fund has freedom and flexibility. The fund is benchmark agnostic. Positioning to particular geographies is likely to change significantly overtime. The fund has been quite volatile and has been subject to the occasional sharp drawdown, although these have generally been quite short and the fund has usually bounced back well.

The fund has tight risk controls in place. Each position has a nominal stop loss. If that is hit, it triggers a review of the position and the stop loss can be moved. If it is hit again, it triggers a mandatory halving of the position.

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