Varma, the largest of Finland’s pension insurance companies, has taken its first step into emerging markets corporate bonds with a $50m (€50m) seed investment in HSBC Asset Management’s new emerging markets (EM) corporate bond fund, citing diversification away from EM sovereign debt as a key attraction.
Petri Ala-Härkönen, head of fixed income, currencies and commodities at Varma, said: “The fund investment nicely complements our emerging markets portfolio from a diversification perspective, given that our portfolio is mostly made up of government bonds.”
He told IPE Varma’s EM bond portfolio was currently worth around €1.1bn in total, and that this latest move represented the institutional investor’s first dedicated investment in EM corporate bonds.
The new fund would invest in bonds issued by companies in emerging markets that were considered to be improving from a sustainability standpoint, said Ala-Härkönen, adding that the investment marked an increased focus on sustainability within Varma’s EM investments.
Bryan Carter, head of EM debt at HSBC AM, said: “As investors, we believe direct and consistent engagement with emerging market issuers can offer opportunities for assessing their ESG plans and progress, their challenges and gaps, and to help drive positive change.”
The asset manager said its new fund – HGIF Global Emerging Markets Corporate Sustainable Bond fund – would follow a bottom-up investment process, with individual issuers selected based on its own assessment, focusing on sustainability challenges that existed within a company’s operations.
HSBC AM said the strategy would result in a high-conviction, low-turnover portfolio which aimed to ensure solid sustainability standards within emerging markets.
“If a company is unable to improve the sustainability of its operations in line with its objectives and demonstrate measures to improve its sustainability, the investment will be divested,” Ala-Härkönen said.
Varma said the fund would exclude investments in socially or environmentally damaging industries such as coal, inefficient energy, tobacco or weapons.
On the fund’s launch date, around 60% of investments were aimed at Latin America and around 20% at Asia, with stakes in financials, consumer staples and basic raw materials accounting for around 60% of investments, the €56.4bn Helsinki-based pension fund said.
Read the digital edition of IPE’s latest magazine
No comments yet