Want to boost your bond allocation? The Asian debt market boasts strong corporate fundamentals, high economic growth, and low currency risk. That makes it an attractive, uncorrelated potential source of both income and price appreciation. That will hold true even as Fed rate hikes leave U.S. high yield in the dust.
In the upcoming webcast, Is it High Time for Asia High Yield in Your Bond Allocation?, Brendan Ahern, Chief Investment Officer, KraneShares; and Peter Graf, Deputy Chief Investment Officer, Nikko Asset Management Americas, Inc, will discuss the benefits of exposure to Asia’s high yield bond market, as well as a look at one actively managed bond strategy that provides exposure to this enticing yet overlooked asset class.
Specifically, the KraneShares Asia Pacific High Yield Bond ETF (KHYB) is an actively managed fund that provides broad exposure to high-yield bonds from the Asia-Pacific region. The fund actively invests in high-yield debt securities of any maturity issued by governments and corporations from the Asia-Pacific region, including both emerging and developed countries.
Nikko Asset Management Americas Inc., the sub-advisor, uses top-down macro research and bottom-up credit research to construct its portfolio, incorporating a proprietary process that combines quantitative and qualitative factors to assess an issuer’s credit profile, along with an assessment of a security’s value and relative value compared to other similar securities.
KHYB may invest in other investment companies, including ETFs and derivatives. After the fallout from Chinese property developer Evergrande sent Asian markets reeling, fixed income investors may turn to this high-yield bond ETF to capture an oversold market.
Asia’s high yield currently offers an attractive income opportunity due to the relatively high growth rates among the region’s economies and the financial health of issuers in the region. After the Evergrande debacle, many of KHYB’s holdings are trading at distressed levels, offering the opportunity to earn some price returns on top of its coupon payment.
According to KraneShares, the Asia Bond Market has witnessed steady growth over the last decade. The JP Morgan Asia Credit Index grew from a market capitalization of $250 billion in 2010 to over $1.2 trillion in 2020, an increase of 368%. The Asian high-yield bond market currently offers higher yields than other global high-yield bond market. As of December 2021, Asia high-yield bonds had a yield of 8.1% compared to 4.74% for U.S. high yield bonds.
Financial advisors who are interested in learning more about Asia high yield bonds can register for the Tuesday, April 26 webcast here.