Subject:                                     Van Eck EMD Unconstrained update, Lead PM in Europe in 2 weeks.



Quarterly Update: Van Eck Unconstrained EMD
Links to the other Candoris Monthlies:
DSM US, Global, EME Growth         Coho ESG US LC        PAM Senior Loans        VanEck EME       SIM US High Yield


Good morning Florian,

2018 was a difficult year for EMD for both hard and local currency. Over the last 6.5 years the return for the EMD 50/50 HC/LC benchmark (GBI-EM and EMBI) is 1.31% annualised! The VanEck - Unconstrained Emerging Markets Bond UCITS fund did a bit better before fees with 1.71% annualised return, but still not great. 

You might wonder; Is there a lot of upside for the asset class after such a long period of low return? 

Lead PM Eric Fine is in Europe in two weeks. We're keen to discuss the opportunities and explain how Eric and his team invest in EMD. Please let us know in case you like to meet (if a meeting is not set up already)

Denmark 4th of February + morning of the 5th
Sweden 5th of February afternoon
Finland 6th of February
The Netherlands 7th of February
Norway 8th of February

Having the mandate to be truly unconstrained, the possibility to take idiosyncratic positions and avoid large benchmark names allows the strategy to be truly active.

In 2018 the VanEck - Unconstrained Emerging Markets Bond UCITS fund outperformed the 50/50 benchmark with 0.39%. (-4.76% vs -5.15% for the benchmark, gross of fees in USD). 

Lead PM Eric Fine will be in Europe in February. 
 Please click below if you like a meeting with him.
A conference call is also always possible.


Commentary from lead PM Eric Fine:

- Commentary

- Replay January 17th Eric Fine EMD Webinar




EMD 50/50 HC/LC benchmark (GBI-EM and EMBI) Blue and the VanEck - Unconstrained Emerging Markets Bond UCITS fund Green



Market Review:
What a month December was, following an eventful November … and an eventful October, for that matter! Let’s just say it was a volatile month quarter year. Two key market drivers of 2018 – the U.S. Federal Reserve and “China” – continued to whip all asset classes back and forth in December. In addition, two key asset prices – those of U.S. stocks and U.S. Treasuries – dominated sentiment. To make things more complicated, EM debt didn’t move in lock-step with U.S. and global equities, perhaps because it went through the wringer first (our hard assets colleagues would quip “No, it didn’t!”, rightly saying resource equities went through the wringer first), and because the U.S. Treasury market finally provided some cushion for fixed income generally. The fund had been positioned defensively (in the sense of low allocations to local currency relative to our 50/50 benchmark), and our performance bore that out during the quarter given a mixed November and a strong December. We’d also note that the fund became less defensive over the quarter as we steadily increased our local currency exposure. Anyway, where do we stand now?

We continue to reduce our defensive stance for three reasons – signals from the U.S. Treasury market (and the Fed), indications that “China” is not a key near-term risk, and a significant cheapening of a number of local currency markets. Let us start with the U.S. Treasury market and the Fed. The U.S. 10-year rate dropped roughly 30 bps in December (!) to its January 2018 low. More importantly to us, the U.S. 2-year rate dropped, but only to its May low. In our view, this points to further downside to 2-year rates if trends continue. This is more important to us because it indicates significant downside risks to the USD, in our opinion. (We typically do not use charts in these publications, but a 12-month chart of 2-year yields and the DXY would show that the U.S dollar has lagged the rally in 2-year rates, and the r2 of the relationship between the 2-year yield and DXY is 0.71 over the past 12 months). Moreover, speculative short positioning in 5- and 10-year Treasuries (according to the U.S. Commodity Futures Trading Commission) has only declined by roughly half, and in the 2-year has barely declined at all (!). This tells us that the “pain trade” is lower 2-year rates and a lower USD. Note that Treasury futures markets are already pricing in some rate cuts (approximately 8 bps) by the Fed next year. Given Fed reactions to the Treasury rally, ongoing economic malaise could easily be met with further Treasury rallies, and the Fed could conceivably be turned into a market tailwind (!).

Please read the full story here: 



The fact that the VanEck Unconstrained Emerging Markets Bond fund is truly unconstrained due to its size and investment process makes it possible to take idiosyncratic positions, avoid large benchmark names and hide in times of stress in the market. EMD HC, EMD LC and EMD Corporates all three have their own risk/return profile and can perform very differently. Van Eck’s Unconstrained EMD strategy is a unique as it is truly unconstrained between the sub classes and it uses a unique bottom up approach. 

Below an graph of the Unconstrained Emerging Markets Bond Fund Allocation.

Click here for the latest commentary and country specific views

The VanEck Emerging market debt unconstrained can be seen as three asset classes in one
1 EMD HC, 2 EMD LC, 3 EMD Corporates. All three have their own risk/return profile and can perform very differently. Van Eck’s Unconstrained EMD strategy is a unique as it is truly unconstrained between the sub classes and it uses a unique bottom up approach. 


The Unconstrained Emerging Markets Bond Strategy seeks to identify undervalued opportunities through investments in emerging market debt securities issued in both hard and local currencies.
The Strategy was among the first to combine local and hard currency bonds in one unconstrained offering. Van Eck believes an unconstrained approach is important because idiosyncrasies exist, and country and currency selections are imperative. An unconstrained approach allows for tactical shifts based on market conditions. The investment process is based on a proprietary approach to assess an issuer’s ability to meet its debt obligations, seeking to exploit mispricings.


Van Eck Unconstrained EMD Composite data                             Van Eck Unconstrained EMD Fund Facts














50% EMBI & 50% GBI-EM

Std Dev



















Asset Class

Fixed Income

Information Ratio







Tracking Error






Emerging Markerts

Sharpe Ratio





Dividend policy


Data as of 31-12-2018 source eVestment


Investment Philosophy

• Experienced management: Dedicated management team is led by Eric Fine, who has spent significant time in the emerging markets and has nearly 30 years of emerging markets investment experience as a strategist and portfolio manage
• Bottom up process: Based on a proprietary approach to access an issuer’s ability to meet its debt obligations, the investment process seeks to exploit mispricings and identify undervalued opportunities.
• Ability to diversify: Increased ability to diversify exposure by currency, region, credit, maturity, and duration.
• Unconstrained strategy: Flexibility to invest across all emerging markets debt components: sovereign and corporates bonds denominated in local and hard currency; our historical allocation demonstrates this approach, as we moved from over 85% local currency to over 90% hard currency exposure over time.

Investment Process – key features of the fund


Please click here for a more detailed presentation about the Unconstrained EMD strategy.




Links to updated presentation and other documentation

Click to receive the information

- Presentation Van Eck Unconstrained EMD
- Van Eck Unconstrained EMD versus peers
- Factsheet
- Commentary
- Kiid's



About Van Eck
A firm with active and passive experience

•34 employees currently managing over $46.1bn in AUM of which $8.2bn active($37.9bn passive):
•Emerging Markets Equity
•Emerging Markets Fixed Income
•Gold and Precious Metals
•Natural Resource Equity, Commodities, Energy
•Guided Allocation

Clients include corporate pension plans, foundations and endowments, financial intermediaries, other institutions, and high net worth individuals.



Best regards,



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* Performances are annualised. The latest data is still preliminary. Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate.. "This email is intended to be reviewed by only the intended recipient and may contain information that is privileged and/or confidential. If you are not the intended recipient, you are hereby notified that any review, use, dissemination, disclosure or copying of this email and its attachments, if any, is strictly prohibited. If you have received this email in error, please immediately notify the sender by return email and delete this email from your system."
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