Sydinvest Emerging Markets

Fixed income element of the portfolio
The Fund will invest in a portfolio of fixed income securities issued or guaranteed by national governments of Emerging Market countries, their agencies or instrumentalities and political sub-divisions. The Fund may also take exposure to such fixed income securities indirectly – see “Use of derivatives” below.

Securities invested in will primarily be listed or traded on Recognised Exchanges worldwide, with a focus on Emerging Markets. However, up to 10% of the Net Asset Value of the Fund may be invested in fixed income securities not listed or traded on Recognised Exchanges.

The Investment Manager will not be restricted by credit quality measured by rating agencies or maturity when making investment decisions. Therefore no minimum credit rating or maxi-mum maturity will apply to the investments of the Fund, which may be rated investment grade or below investment grade as determined by Standard & Poor’s Rating Group.

Fixed income securities invested in may be denominated in US Dollars or other hard currency or the local currency of issue. The types of fixed income securities the Fund may invest in includes, but is not limited to bonds (which may be fixed, floating or contingent cash flows) and notes (including structured notes which may contain embedded derivatives). Fixed rate debt securities are securities which carry a fixed rate of interest. Floating rate debt securities or securities with contingent cash flows are securities that carry variable coupon payments which may fluctuate with general market conditions.

“Emerging Markets” can be defined as, but is not limited to countries that are determined by the World Bank as having a low or middle per capita income. Examples include but are not limited to:

Algeria, Angola, Argentina, Azerbaijan, Bangladesh, Belize, Belorussia, Bosnia-Herzegovina, Botswana, Brazil, Cambodia, Central African Republic, Chile, China, Colombia, Croatia, Czech Republic, Democratic Republic of Congo, Dominican Republic, Egypt, El Salvador, Ethiopia, Gabon, Gambia, Georgia, Ghana, Hungary, India, Indonesia, Israel, Ivory Coast, Jamaica, Jordan, Kazakhstan, Kenya, Korea, Laos, Lebanon, Madagascar, Malaysia, Ma-lawi, Maldives, Mauritius, Mexico, Moldavia, Mongolia, Morocco, Mozambique, Nepal, Nige-ria, Pakistan, Panama, Peru, Philippines, Poland, Qatar, Russia, Senegal, Serbia, Slovakia, South Africa, Sri Lanka, Taiwan, Tanzania, Thailand, Tunisia, Turkey, UAE, Uganda, Ukraine, Uruguay, Venezuela, Vietnam and Zambia. 

Currency element of the portfolio
The Fund will also invest a portion of the Fund's assets in currency exchange transactions on currencies of Emerging Market countries either on a spot basis or via financial derivative in-struments, principally options on foreign currencies and forward foreign exchange contracts. Such derivative instruments may be entered into over the counter or traded on Recognised Exchanges worldwide – see “Use of derivatives” below.

The Fund aims to identify opportunities in the Emerging Market currency markets and capita-lise on such opportunities through investments in local and hard currency fixed income mar-kets. Further details are disclosed under the heading "Investment Strategy" below.

Use of derivatives
The Fund may invest in derivatives in order to obtain indirect exposure to target investments (i.e. fixed income securities and currencies) and/or to gain short exposure.

Financial derivative instruments in which the Fund may invest or use for investment purposes include forwards (including forward rate agreements), non-deliverable forwards, exchange traded futures on currencies, index futures, options on currencies, options on currency fu-tures, OTC options and swaps (including interest rate swaps, currency swaps and credit de-fault swaps. Use of derivatives on commodity indices will be restricted to hedging purposes only, as a means of reducing commodity price sensitivity from the portfolio’s market expo-sure. The use of derivatives on commodity indices shall in each case be within the conditions and limits set out in the UCITS Notices and will be restricted to indices that have been cleared in advance by the FSA.

While the Fund will invest in Emerging Market fixed income securities and currencies (directly and indirectly) as referred to above, the Fund may, if market factors require and if considered appropriate to the investment objective, invest on a short term basis in sovereign or quasi-sovereign fixed income securities and currencies relating to non-Emerging Market countries worldwide or retain amounts in cash, cash equivalents and money market instruments (including, but not limited to, cash deposits, commercial paper and certificates of deposit), or collective investment schemes. Such collective investment schemes will have investment objectives which are materially similar to the Fund. Any investment in collective investment schemes shall not exceed in aggregate 10% of the Net Asset Value of the Fund.

The fund is investing in compliance with UCITS Directive 85/611/EC, 2001/107 and 108/EC (UCITS IV) with Parts 13 and 14 of the Danish Investment Associations and Special-Purpose Associations and other Collective Investment Schemes etc Consolidated Act. The fund is ac-cumulating returns and issue shares as described in section 19 of the Danish Capital Gains Tax Act and allocates net profit in accordance with Article 25 (1) of the Articles of Associa-tion. The shares are registered with Danish VP Securities, under Article 9 of the Articles of Association.

The fund targets institutional clients and financial institutions.

The base currency of the fund is EUR.

Benchmark: The fund does not have a benchmark.

Investment philosophy
The Fund will manage its investments in a prudent manner - the Investment Manager will continuously monitor and reassess return opportunities and risk exposures, as its own ex-pectations change relative to market expectations.

The Fund uses a combination of relative value and directional trades in both local and hard currency Emerging Market debt and foreign exchange markets, in order to generate returns, within a tightly controlled quantitative risk environment. The Fund may use derivatives as a part of a disciplined investment process in order to reduce or limit risk or to generate addi-tional market exposure.

Given that the Fund’s objective is to provide positive returns, as and where possible, the Fund may at times hold full market exposure, if deemed necessary by the Investment Manager, whilst at other times the Fund may hedge its market exposure entirely.

Investment strategy
The Investment Manager bases the overall investment strategy on a rigorous fundamental and quantitative analysis of the global macro economy, fixed income and foreign exchange markets, giving special attention to valuation anomalies within the Emerging Markets uni-verse. The Investment Manager intends to draw in general on its experience in the broad Emerging Markets universe, as well as draw more specifically on its expertise in under-researched, less developed countries, markets and instruments, which are not constituents of publicly available Emerging Markets bond indices, in order to meet the Fund’s investment objective.

A “top-down” investment approach identifies market allocation and country selection, which is then combined with a “bottom up” analysis that enables the Investment Manager to select specific issuers, securities and currencies with the aim of achieving positive returns.

The investment approach allows a diversified and actively managed portfolio to be identified and constructed in order to meet the Fund’s investment objective.

Market allocation
The Investment Manager determines the overall level of market exposure for the Fund based on top-down fundamental research and analysis of macro-economic, interest, credit and for-eign exchange rate movements, thus taking strategic and cyclical themes into account.

Country allocation
The Investment Manager determines the potential for positive or negative price change in both fixed income securities and currencies in Emerging Markets countries, due to the fun-damental creditworthiness of a country’s debt, interest rate or currency direction, using quan-titative and qualitative methods.

Currency Management
The Fund will use foreign currency exposure to enhance returns via an active currency over-lay with a focus on currencies of Emerging Markets countries. The hedging ratio for all cur-rencies will be fully flexible, ranging from 0% to 100%, thereby protecting the investor, either partially or fully from losses derived from depreciating currencies, whilst allowing the Fund to benefit from appreciating currencies. Additionally the Fund may use currency derivatives in currencies to which the Fund has no underlying exposure to create additional returns.

Relative value
The Investment Manager determines the “bottom up” micro-economic analysis of instrument type, investment horizon and exit strategy. This analysis is applied to identify investment in-struments which the Investment Manager considers to be inherently undervalued or under-valued relative to another instrument.