Credicorp Capital plans to launch a Ucits version of one of its Chile-domiciled Latin America bond funds in a bid to expand its offshore business, Citywire Americas has learned.
The dollar-denominated Credicorp Deuda Corporativa Latam fund invests in investment grade corporate bonds in Latin America and the Caribbean.
As of April 30, 26.1% of its allocation was in Chile, 4.1% to Peru and the rest in other countries such as Mexico and the Cayman Islands, according to its factsheet.
Launched for local Chilean investors in September, it has about $80 million in assets, said co-portfolio manager Rodrigo Barros, who runs the fund along with Victor Diaz.
Rafael Castellanos, the firm's head of structuring and offshore products, said they expect to launch the Ucits version once the local fund hits $100 million in assets, which should happen in six months or less.
The firm aims to sell it to Latin American investors first and to later include it on the Pershing platform so investors around the globe can access it, Barros said.
Credicorp's current Ucits line-up features two funds, a $75 million Latin American corporate debt vehicle with a high yield tilt and a $14 million Pacific Alliance equities vehicle.
During a roadshow to promote the Latin American high yield fund, investors expressed interest in an investment grade vehicle, Castellanos said, which led Credicorp to launch the fund.
‘Because of legal requirements [institutional investors] are going to safer funds, particularly with more conservative profiles,’ Castellanos said.
‘In fixed income in general, with increases in interest rates, many people are focusing on emerging markets and Latin America. The yields that it can bring are very interesting.’
Chile’s six AFPs have been increasingly buying Latin American investment grade corporate bonds in recent months. The pension funds offer pension savers five portfolios, labeled alphabetically from the riskiest ‘A’ portfolio to the most conservative ‘E’ fund.
In the past 12 months, savers have migrated toward the ‘E’ fund in response to a movement in Chile called ‘No + AFP’ or ‘No More AFP,’ which argues that the more conservative fund is less prone to losses.
Savers have also moved in response to alerts from an app called Felices y Forrados, or ‘Happy and Loaded’ in Spanish, which prompts its 65,000 subscribers to switch portfolios to avoid risk, moving up to $3 billion in assets among the funds at once.
The ‘E’ fund can only invest up to 5% in equities, while the rest of its portfolio has to be allocated to investment grade fixed income.
Its growth has encouraged asset managers to launch bond funds in the investment grade space. In addition to Credicorp, Chilean firms such as Bice have seized on their regional expertise and launched Latin American fixed income funds.
Another Chilean financial group, Bci, launched a Latin American corporate credit investment grade Ucits in December.