The emerging market debt universe is a tough arena to compete in. Beholden to sudden shifts in sentiment and sometimes uncontrollable currency swings, even veteran managers can have periods of underperformance.
However, with investor appetite for the emerging world improving as the hunt for yield persists, which managers have made the greatest strides over the past 12 months?
Taking a look at the 223 managers currently active in the Emerging Markets Global Hard Currency sector, several have improved more than 100 rankings places from where they sat at the end of July 2017.
However, there is one fund management trio which is now sitting a whopping 201 places above where they were over the first 12-month analysis period.
Back at the end of July 2016, US-based trio Jeffrey Grills, Gunter Heiland and Robert Rauch were sitting near the bottom of their sector. Their previous 12-month performance landed them 205th out of the 208 fund managers active in the Emerging Markets Global Hard Currency over that period.
Over this time frame, the Connecticut-based managers, who have run their Dublin-domiciled Gramercy Total Return Allocator EM Debt fund since 2014, lost 2.83% while its Citywire-assigned benchmark, the JP Morgan EMBI +, rose 13.4%.
The following 12 months, however, saw a considerable change in fortune. Following this difficult period the managers vastly improved their performance and well oustripped their benchmark. On a 12-month basis, the average manager out of the now 223-strong sector returned 5.83% in US dollar terms, while the index rose just 3.29%.
In comparison Grills, Heiland and Rauch returned 12.09% - a return almost four times greater than the index and more than double the average manager. This sees them sit fourth in the sector overall.
A spokesperson for Gramercy told Citywire Americas' European publication Citywire Selector that the majority of changes to the portfolio over the past year were driven by profit taking in credits. He named Argentina as a market that had seen a rotation towards stronger credit bets as a result of rebalancing.
‘The exposure to Mexican debt was reduced over the course of the past year. There is more value in a more diversified basket of credits that should fare better if weakness in the peso returns or negative sentiment regarding NAFTA increases.
‘A similar story is true in Russia,’ he added. ‘We believe that certain credits had become fully valued and remain at risk of further US sanctions while others remain strong and in our opinion are less of a target for further sanctions if US – Russian relations continue to deteriorate.’
‘The exposure to undervalued corporates was cited as a strong driver of performance over 2016-17, with the lower commodities prices having hugely impacted returns in the prior 12 months.
'The team did not expect the extent of the downturn in prices, like oil dropping to $26 per barrel in February 2016. This overshoot negatively impacted the positioning in the fund and caused weaker than anticipated performance over that period,’ the spokesperson added.