Barings Emerging Markets Local Debt Fund

Investment rationale

The fund is designed to seek long-term total return through investment in emerging markets local currency-denominated debt, so it can serve as a specialist fixed income allocation within a broader portfolio. It carries a summary risk indicator of 3 out of 7 and has a recommended holding period of 5 years, which aligns it with investors prepared to commit capital over the long term. The fund is intended for investors seeking income from capital over a long-term horizon and able to bear losses up to the amount invested, with no capital protection. Its distinct role comes from its focus on emerging markets government and quasi-sovereign local currency debt, combined with opportunistic multi-currency exposure and use of derivatives.

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How the strategy works

The objective is to seek long-term total return through investment in a diversified portfolio of emerging markets local currency-denominated debt securities. The fund invests primarily in local currency debt issued by governments and quasi-sovereign agencies and issuers in emerging markets, with up to 20% of net assets in convertible securities; it may also invest in other debt securities, other funds, cash, cash-equivalent securities and money market instruments. At the time of purchase, exposure to a single emerging market country may not exceed 20% of net asset value, and net non-USD exposure may not exceed 150% of net asset value; at least 50% of net asset value must be in assets with positive or improving environmental and/or social characteristics based on a proprietary aggregated ESG current state and outlook score. The benchmark is the J.P. Morgan Government Bond Index - Emerging Markets Global Diversified Index, used for risk management and performance comparison rather than as a tracking target, while the fund is actively managed with complete investment discretion. The share class is unhedged, derivatives may be used for investment and hedging purposes, income is accumulated, dealing is daily, and the recommended holding period is 5 years.

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Investment philosophy

• The portfolio is built primarily from a diversified set of local currency-denominated debt securities issued by governments and quasi-sovereign agencies and issuers in emerging markets.

• The fund may complement these holdings with other debt securities, convertible securities, other funds, cash, cash-equivalent securities and money market instruments, with convertible securities capped at 20% of net assets.

• Country and currency exposures are managed within stated limits: a single emerging market country cannot exceed 20% of net asset value at purchase, and net non-USD exposure cannot exceed 150% of net asset value.

• The fund must invest at least 50% of net asset value in assets showing positive or improving environmental and/or social characteristics, measured through a proprietary aggregated ESG current state and outlook score.

• The manager uses derivatives for both investment and hedging purposes, can take opportunistic currency exposure across multiple currencies for the whole portfolio, and manages overall fund exposure relative to the benchmark for risk management purposes.

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Distinctive features

The fund offers specialised access to emerging markets local currency debt through a diversified portfolio focused on government and quasi-sovereign issuers. Its structure includes explicit portfolio controls, including a 20% cap on single-country exposure at purchase and a 150% cap on net non-USD exposure, while still allowing opportunistic currency positioning. A minimum 50% allocation to assets with positive or improving environmental and/or social characteristics is built into the strategy. The share class is available with daily dealing, no entry fee, and no fund-level exit fee.

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Risks

The fund has a summary risk indicator of 3 out of 7, described as a medium-low risk class, and it does not include capital protection, so investors could lose some or all of their investment. The fund is exposed to market risk, counterparty risk, currency risk, interest rate risk, operational risk and liquidity risk. These risks are linked to the fund’s investment in emerging markets local currency debt, its ability to take exposure to multiple currencies, and its use of derivative instruments for investment and hedging purposes. Liquidity may also matter on early exit, as investors may have to pay significant extra costs to cash in early or may not be able to sell easily without affecting the price received. In addition, there is no compensation or guarantee scheme in place for investors.

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Asset manager

The product manufacturer is Baring International Fund Managers (Ireland) Limited. It is authorised in Ireland and regulated by the Central Bank of Ireland. The fund is a sub-fund of Barings Umbrella Fund plc.

2026-07-08