High-yield EM bonds
ContactWhat does the strategy invest in?
Bonds of EM issuers
Who is it for?
Conservative investors who seek a higher return than high-yield bonds with relatively low risks
Target parameters
Target return: 6-8% per annum in US dollars*
Risk: Corresponds to the risk of the money market
Investment horizon: One year or longer
Withdrawals: Anytime
* see below for details about how the expected return is achieved
Investment strategy
What makes the strategy special
Fund returns are historically higher than global high-yield bond indexes amid lower volatility — interest rate risk is eliminated and credit risk is greatly reduced by the portfolio’s short duration.
Strategy objective
The strategy seeks to capture absolute income in dollar terms. It returns more than peer benchmarks even during market downturns, including the 2021-22 market correction.
How we do it
We invest in bonds of EM issuers. The portfolio is built almost entirely from short-duration bonds (most have a duration of 1-2 years) with credit ratings from B- to BB+.
Fund
Fund facts and investment terms
Results
Results
Return for period |
|||||
Annual return |
Annual volatility |
3-year, % |
1Y, % | YTD, % | |
Cossack Fund | 11,0 | 6,9 | 4,3 | 17,0 | 12,8 |
JP Morgan EMBI Plus Index | 6,1 | 10,1 | -8,4 | 6,3 | 4,6 |
Bloomberg Global High Yield Index | 6,7 | 10,1 | -0,3 | 10,7 | 9,6 |
HFRX Fixed Income - Credit Index | — | — | -1,9 | 3,7 | 3,4 |
Risks
Risk management
Description Bond prices could change in response to changes in rates or rate expectations
Risk management method The fund's portfolio generally has short duration. According to data as of October 2023, its duration was 1.18 years, versus 4.1 years for the Bloomberg Global High Yield Index. The short duration significantly reduces interest rate risk, basically allowing investors to ignore it.
Description Payment of obligations could be delayed
Risk management method A thorough, comprehensive analysis of bond issuers is complemented by diversification. The fund’s rules do not allow one issue to account for more than 10% of investments, and generally it is no more than 3-4%. Indeed, the fund usually takes on much less credit risk: over the last 60 months, it has a weighted average of 74.5 positions in the portfolio. The maximum leverage is set at 20% of assets under management.
Description The dollar could strengthen against the currencies in which investments were made
Risk management method The fund invests and calculates returns in US dollars, and when necessary hedges currency risks against the US dollar. The fund may invest in soft-currency bonds, but these investments typically do not exceed 10% of the fund's portfolio. If there is a strong conviction that the dollar is seeing a period of weakening, these investments may be increased in the short term.