Neuberger Berman EM DbtHrdCcy USD I Dis

Analyst Report
Morningstar's Take
|29/05/2024

by Arvind Subramanian
An experienced team and a time-tested investment process underpin our conviction in Neuberger Berman Emerging Markets Debt Hard Currency.

This strategy is led by Bart van der Made, an emerging-markets veteran with nearly three decades of investment experience, who has been at the helm since the fund’s inception in 2013. He is supported by comanagers and the heads of the firm’s emerging-markets debt team, Rob Drijkoningen and Gorky Urquieta. The trio have worked together for more than two decades, having previously run an identical strategy at their former employer, ING Investment Management, for 12 years with impressive results. In 2013, they moved to Neuberger Berman to take charge of the firm’s emerging-markets debt effort. The trio is now backed by a nine-member hard-currency group, which is noticeable for its deep experience and stability.

The investment process here relies primarily on bottom-up country selection, with top-down beta management playing a secondary role. Van der Made and his team don’t try to boost returns by dipping into local-currency-denominated debt or direct exposures to emerging-markets currencies. Rather, their focus is on hunting for undervalued debt in less-trodden corners of the market, as recent sizable stakes in the debt of below-investment-grade issuers Ivory Coast and El Salvador illustrate. They are also willing to sit out periods of underperformance to see long-term bets pay off, demonstrated by the portfolio’s low turnover.

True to the strategy’s characteristics, the fund staged a dramatic recovery in 2023 and the first quarter of 2024, following a challenging phase in the previous few years. Overweight positions in high-yield sovereign bonds of El Salvador, Argentina, and Sri Lanka helped the fund’s USD institutional share class return 13.9% in 2023, significantly beating its benchmark’s 11.1% gain. Meanwhile, the fund’s track record since its June 2013 inception remains robust, thanks to the team’s success in identifying bargains among lower-rated or less liquid corners of the market.
 
Morningstar Medalist Rating™A standout emerging-markets debt offering.
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Morningstar Pillars
PeopleHigh
ParentAbove Average
ProcessHigh
 
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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