Fidelity Worldwide Investment global high-yield fund co-manager Peter Khan says he will favour emerging market banks over developed market banks in the new fund.
The fund, which launched this week for Khan and senior portfolio manager Ian Spreadbury, will invest in 150 holdings, principally in BB and B-rated credits, with the option to hold CCC-rated securities.
Khan says: “There can be a lot of value in the banking sector but it is a minefield. There are some high-growth opportunities in emerging market banks in particular. As a global high-yield manager, I have an advantage over regionally focused high yield in terms of stockpicking opportunities.”
Khan says privately managed banks in emerging markets often offer good value to investors.
He says: “Investing in banks with strong capital generation in growing economies with developing middle-class consumers is more appetising than investing in banks that are in the process of deleveraging and restructuring.
“Also, banks in developed markets are more exposed to a consumer base that is more challenged by austerity or low income growth.”
Hargreaves Lansdown senior analyst Meera Patel says: “The emerging market debt market is developing and has more attractive yields in comparison with developed market debt.
“However, investors should be aware of risk as just because one emerging market bank might look better on paper, anything could go wrong and they are considered higher risk.”