Asian Fixed Income Opportunities Strategy
Asian Fixed Income Opportunities Strategy

Asian Fixed Income Opportunities Strategy

 
 
 
Summary

The Asian Fixed Income Opportunities Strategy seeks to provide access to the full spectrum of Asian ex-Japan fixed income, selecting investment opportunities across hard and local currency, sovereign and corporate debt. The team invests with no sector limitations, utilizing an approach that combines top-down macro assessment with rigorous fundamental analysis to identify the best investment ideas in each segment of the market.

0-6 years
Typical Duration
3.5-6.5%
Typical Yield to Maturity
Max 50%
Non-U.S. Dollar-Denominated Exposure
 
 
Investment Approach
Philosophy

The investment team believes that in the long run, value prevails and research wins. Hence, an active and flexible approach is the best way to invest. Central to the team’s investment philosophy is a structure that allows the team to:

Think Globally

Collaborate

Diversify

Debate

 
Differentiators
Asset allocation benefits

The team analyses regional and macro themes, country fundamentals and rate, currency and credit dynamics to generate broad investment targets.

Deep research

The team has a thorough process to help identify the best individual investments in each segment of the market.

Experienced team

Our experienced Emerging Markets Debt team provides extensive research and analysis of the Asian fixed income markets. This is supported by the broader knowledge and experience of the Global Fixed Income Team.

 
 
 
Investment Process
1
Macro analysis

The process begins with a top-down, value assessment of the global fixed income universe, with specific focus on the Asia ex-Japan region. The team seeks to identify the themes driving asset prices across countries, credit, rates, and currencies which, in turn, drives the asset allocation process. The team seeks first to identify areas where implied market forecasts are out of line relative to historic trends and secondly, to identify what the catalyst will be for the market to adjust, and for the sector to re-value.

2
Asset allocation

Following this assessment the team sets the overall investment direction of the portfolio, and sector positions. The asset allocation process is an integral part of the investment process which allows the team to capture the breath of opportunities within the Asian ex-Japan fixed income markets. This enables the team to build diversified portfolios, one of the four key principles of the team’s investment philosophy and fundamental to the ethos of the Asian Fixed Income Opportunities Strategy.

3
Security selection

Research is conducted by dedicated economists and analysts that specialize in the Asia credit, rates, and currency universe. This process is supported by additional macro and credit specialists from the Global Fixed Income Team. Portfolio Managers then work with the research analysts to implement these ideas across fixed income portfolios, in accordance with each portfolio’s objectives and guidelines.

4
Portfolio construction

The team uses a Positioning & Sizing framework that takes into consideration the total return potential of investment alternatives, the volatility of returns and correlation of such potential positions to assess risk, and a conviction factor about the return/risk trade-off based on a comprehensive review of event risk (including near-term political factors) and the market technicals such as planned issuance, investors’ positioning, and outlook for asset class flows.

5
Risk management

Risk management is integrated throughout the team’s investment process. An independent team also monitors portfolio adherence to guidelines, overall risk levels, and composition.

 
 
Portfolio Managers
Managing Director
22 years industry experience
Chief Investment Officer of Global Fixed Income
29 years industry experience
Managing Director
23 years industry experience
Executive Director
13 years industry experience
 
 
Insights
Global Fixed Income Bulletin
Time to Be More Selective
Nov 06, 2017
The Global Fixed Income team discusses how it may be time to be more selective in the fixed income markets and how security selection will be important.
Global Fixed Income Bulletin
Bad Politics, Good Economies
Sep 14, 2017
The team discusses how with fundamentals and monetary policy stable, political noise has become the main source of market volatility.
Global Fixed Income Insights
NAFTA Exit, Who Really Gets Hurt?
Sep 14, 2017
The Emerging Markets Debt team discusses their analysis of who really gets hurt if the U.S. exits the North American Free Trade Agreement (NAFTA).
 
 
 
 

RISK CONSIDERATIONS  

Diversification does not protect you against a loss in a particular market; however it allows you to spread that risk across various asset classes.

There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market value of securities owned by the portfolio will decline. Accordingly, you can lose money investing in this portfolio. Please be aware that this portfolio may be subject to certain additional risks. Fixed-income securities are subject to the ability of an issuer to make timely principal and interest payments (credit risk), changes in interest rates (interest-rate risk), the creditworthiness of the issuer and general market liquidity (market risk). In the current rising interest-rate environment, bond prices may fall and may result in periods of volatility and increased portfolio redemptions. Longer-term securities may be more sensitive to interest rate changes. In a declining interest-rate environment, the portfolio may generate less income. High yield securities (“junk bonds”) are lower rated securities that may have a higher degree of credit and liquidity risk. Investments in foreign markets entail special risks such as currency, political, economic, and market risks. The risks of investing in emerging marketcountries are greater than the risks generally associated with investments in foreign developed countries. Sovereign debt securities are subject to default risk. Derivative instruments can be illiquid, may disproportionately increase losses and may have a potentially large negative impact on the portfolio’s performance. The use of leveragemay increase volatility in the Portfolio. Non-diversified portfolios often invest in a more limited number of issuers. As such, changes in the financial condition or market value of a single issuer may cause greater volatility. Restricted and Illiquid securities may be more difficult to sell and value than publicly traded securities (liquidity risk). Asia marketentails liquidity risk due to the small markets and low trading volume in many countries. In addition, companies in the region tend to be volatile and there is a significant possibility of loss. Furthermore, because the strategy concentrates in a single region of the world, performance may be more volatile than a global strategy.

This communication is only intended for and will be only distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations.

There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. Past performance is no guarantee of future results.

A separately managed account may not be suitable for all investors. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. A minimum asset level is required. For important information about the investment manager, please refer to Form ADV Part 2.

Any views and opinions provided are those of the portfolio management team and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring. The views expressed do not reflect the opinions of all portfolio managers at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

All information provided has been prepared solely for information purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.

DEFINITIONS

Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates.

Yield-To-Maturity is the rate of return anticipated on a bond if it is held until the maturity date.

­OTHER CONSIDERATIONS

The indexes are unmanaged and do not include any expenses, fees or sales charges. It is not possible to invest directly in an index. Any index referred to herein is the intellectual property (including registered trademarks) of the applicable licensor. Any product based on an index is in no way sponsored, endorsed, sold or promoted by the applicable licensor and it shall not have any liability with respect thereto.

The J.P. Morgan Asia Credit Index (JACI) tracks total return performance of the Asia fixed-rate dollar bond market. JACI is a market cap-weighted index comprising sovereign, quasi-sovereign and corporate bonds and it is partitioned by country, sector and credit rating. 

The information presented represents how the portfolio management team generally implements its investment process under normal market conditions.

The weights, tracking error typical yield duration, and the number of issuers represent represent typical ranges and are not a maximum number. The portfolio may exceed these from time to time due to market conditions and outstanding trades. 

Morgan Stanley Investment Management is the asset management division of Morgan Stanley.

 

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