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Newton’s European High Yield Bond Fund goes global

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Newton’s European High Yield Bond Fund has taken on a global remit and has been re-named the Newton Global High Yield Bond Fund. 

Parmeshwar Chadha, the manager of the fund, says limiting the fund to Europe meant missing out on opportunities in the wider market.

“The US dollar-denominated high yield market makes up almost 80 per cent of the entire high yield bond market, so being restricted to investing solely in European denominated currencies was obviously a disadvantage. Add to that the fact that a significant proportion of emerging market high yield debt is US dollar-denominated – China, India, Indonesia to name but a few – and the reasons for the change seem to be a no-brainer,” he says.

The change means that markets such as China, India and much of Latin America are now opened up for the fund to invest in.

“We plan to take advantage of this wider investment universe,” says Chadha. “Newton’s thematic process encompasses a global approach to investing, so a global remit means we can take advantage of global trends and opportunities pinpointed by our 32-strong global research team. This has already led us to quality names in the infrastructure, commodity and property sectors, in the emerging market arena in particular.

According to Chadha, infrastructure spending in developing economies is growing rapidly and Newton has exposure to this through holdings in bonds issued by businesses such as the Chinese property developer Agile. The company has been a significant beneficiary of the vast government stimulus efforts seen over the past year, while the continuing trend of urbanisation seen across China should support its presence in the rapidly growing tier 1, 2 and 3 cities across China.

Chadha says the past couple of years have been far from rosy for high yield bond markets so while Newton maintains a positive outlook on the asset class, it remains conscious of possible pitfalls ahead.

“The staggering amount of government debt issued increases the risk of a sovereign crisis in a G8 economy, which would clearly have catastrophic consequences for financial markets. This scenario remains unlikely, however, but the threat posed by a ‘double-dip’ recession holds more weight.”

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