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Vontobel AAA-rated star raises risk in emerging markets fund

Vontobel AAA-rated star raises risk in emerging markets fund

Vontobel's emerging markets veteran Luc D'Hooge has been raising the level of risk in the Vontobel Emerging Markets Debt fund since February, the manager told Citywire Switzerland.

'That's how we found a lot of attractive positions in Africa. Because of the greater uncertainty in the markets due to a possible US-China trade war, the newly issued bonds have an attractive premium,' Citywire AAA-rated D'Hooge said.

For example, a trade war between the US and China would be very positive for emerging economies, he said. Some Latin American countries, for example, might be able to step into the breach to fill any trade gaps.

'Our two biggest bets are currently positions in Mexico and Argentina. There is a lot of value potential in Mexico,' D'Hooge said. 'In addition, Mexico benefits greatly from trade with the US. The forthcoming elections, in which the left-wing candidate Andrés Manuel López Obrador has a good chance, could also have positive effects for the country.

'To be honest, the current rating for Mexico makes little sense and is far too low. For Argentina, we expect an improved situation and upgrades in the coming months. But even so, the situation is difficult there. Of course, that offers opportunities on the other side,' the emerging market expert explained.

At the end of March, D'Hooge's fund held an 8.9% weighting to Mexico and 8.4% in Argentina. The fund currently has assets under management of around CHF 1.3 billion, but overall D'Hooge is responsible for more than CHF 2.7 billion at Vontobel.

'Our more aggressive positioning is also reflected in the slightly lower average rating of our fund versus the benchmark,' D'Hooge said.

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