Fund Rationale: Neuberger Berman Short Duration Emerging Market Debt Fund

Neuberger Berman Short Duration Emerging Market Debt Fund (the "Fund")
SGD Hedged Class A Monthly Distribution Shares (ISIN: IE00BMN94165)
Fund Manager Page

Endowus has selected the Fund as it offers a diversified portfolio of hard currency, short duration EM debt instruments while consistently achieving its investment objective of 3% average return over its benchmark before fees, as well as stable income.
-----------------------------------

Key Information

Fund Objective: Aims to achieve a target average return of 3% over cash before fees over a market cycle (typically 3 years) by investing in a diversified selection of Hard Currency-denominated short duration sovereign and corporate debt issued in Emerging Market Countries.

Suitability: Investors who are prepared to accept the general risks associated with investing in Emerging Market Countries and the risks of bond markets over the medium to long term, and are prepared to accept medium to high levels of volatility due to the Fund’s portfolio management techniques.

Cost:
Neuberger_Berman_Short_Duration_Emerging_Market_Debt_Fund_Cost.png
* Total Fund-level Fees include fund management fee of 1.0%.
** Endowus do not charge a preliminary sales charge or any other additional fees, other than the all-in Endowus Access Fee.

Fund Characteristics

Fund Inception: 31 October 2013
Share Class Inception: 31 October 2014
Benchmark: ICE BofA US 3-Month Treasury Bill

Fund AUM: SGD 8.3bn
Source: MorningStar as of 27 May 2021. Please refer to the FMC page for the most updated AUM.

🌱EU SFDR Rating: Article 8

Regional Allocation:
Neuberger_Berman_Short_Duration_Emerging_Market_Debt_Fund_Region.png

Sector Allocation:
Neuberger_Berman_Short_Duration_Emerging_Market_Debt_Fund_Sector.png

Source: MorningStar as of 30 April 2021. Allocation data indicate actual exposure as a percentage of the Fund's total Net Asset Value. Please refer to the Fund Manager Page for the most updated information on Fund Holdings and Breakdown.

Selection Criteria

Endowus has selected the Neuberger Berman Short Duration Emerging Market (EM) Debt Fund as it offers a diversified portfolio of hard currency, short duration EM debt instruments while consistently achieving its investment objective of 3% average return over its benchmark (ICE BofA US 3-Month Treasury Bill) before fees. We also like the stable payout which is  an additional benefit for investors.

The investment team, combining bottom-up credit analysis with top-down recommendations from different sectors and countries at a given market cycle, constructs a basket of 200 to 400 hard currency instruments, targeting to achieve an average investment grade portfolio with stable return and lower volatility over the long term. The performance of the holdings are reviewed regularly to meet this objective, and the team ensures that investments with strong fundamentals are made  to avoid default risk. 

We also like the ESG analysis embedded in the investment research; ESG risks are assessed on both the macro country-level as well as on the micro issuer-level, excluding all individual securities with an unfavourable ESG rating on at least one of the assessments. With this approach, the Fund has earned an SFDR Rating of Article 8.

The Fund is managed by a team of three Portfolio Managers, Jennifer Gorgoll , Nish Popat, and Bart Van Der Made, who joined Neuberger Berman in 2015 from ING and has, since then, managed to grow their AUM from 0 to USD 30 billion across their five EM Debt strategies. As early investors in the EM Debt space specialising in sectors such as Corporate Credit and Hard Currency, the team has been working together since 2000. This long-term collaboration is supplemented by the strong team of research analysts on the Neuberger Berman EM Debt platform, specialising in not only credit recommendations and country positioning by region, but also enabling the most efficient investment execution through a globally-present trading team.

The Strategy has seen a stable payout historically; we think this is a good representation of the Strategy’s prudent yet efficient management in delivering not only a good total return over the benchmark but also significantly limiting volatility and downside risk. From a portfolio perspective, this Fund is suitable for investors who prefer fixed income solutions that are less sensitive to rising interest rates. By adding this Fund, it is possible to reduce portfolio duration without compromising too much on yield.

🌱Sustainable Investing Methodology

Neuberger Berman will manage the Fund in accordance with the ESG Policy on a continuous basis. Neuberger Berman has fully integrated the ESG Policy into the overall investment process. A summary of the ESG Policy is available on the Neuberger Berman website.

Neuberger Berman shall also apply the Controversial Weapons Policy when determining what investment to make for the Fund. Further details on these screening/exclusion policies are set out in the “Sustainable Investment Criteria” section of the Prospectus. In addition, the Fund excludes companies which are involved in direct child labour, in the tobacco industry, as well as certain companies with significant exposure to thermal coal or oil sands.

ESG factors are integral to Neuberger Berman's investment process, and are tracked and considered by all analysts and portfolio managers, with regular research and data management conducted by Neuberger Berman's economists. Neuberger Berman looks at a wide array of ESG factors that seek to capture immediate developments and long-term trends. 

In relation to Emerging Market Countries, Neuberger Berman shall consider environmental factors including (i) the energy intensity of GDP, (ii) CO2 emissions levels per GDP and per capita, (iii) the degree to which electricity is being produced from coal sources, and (iv) how countries score in the Notre Dame Global Adaptation Initiative Index, a global adaptation ranking which looks at country preparedness to climate change. Neuberger Berman also monitors countries’ contributions/adherence to the UN Sustainable Development Goals.

In terms of social factors, Neuberger Berman analyses a country’s relative position on (i) income, (ii) education and (iii) health as tracked by local and international organizations and development banks, as well as (iv) factors related to the effectiveness and legitimacy of the administration through public opinion surveys.

The governance factors that Neuberger Berman tracks in relation to Emerging Market Countries include (i) the political sphere of the relevant country, (ii) the adherence to the rule of law, (iii) control of corruption, political uncertainty related to upcoming elections and (iv) a focus of the quality of economic governance, namely the government’s role as an effective regulator and support of the private sector through responsible financial, macroeconomic and international trade policies.

Neuberger Berman makes assessments on these ESG factors on a regular basis, at least at each quarterly portfolio review and expands upon these factors from time to time. 

In addition to integrating the aforementioned screening/exclusion policies into the portfolio construction process, Neuberger Berman utilises a proprietary ESG scoring system for Emerging Market corporate issuers, to identify qualitative risks and opportunities in the overall credit assessment. This scoring system includes an in-house governance assessment tool and a specific scoring methodology for environmental and social factors whereby Neuberger Berman selects a number of underlying factors from different ESG research providers, which are material for corporate fundamental and spread developments. The ESG factors applied are sector-specific depending on their materiality for each sector. Companies that have a low score (i.e. of 33/100 or lower) are excluded from the investment, unless Neuberger Berman's engagement efforts with the investee company result in a positive outlook regarding the ESG score.

Neuberger Berman shall also engage directly with management teams of the investee companies through a robust qualitative ESG engagement program. This program is focused on in-person meetings and conference calls to understand risks and opportunities at investee companies. Neuberger Berman views this direct engagement with investee companies, as an essential part of its investment process.

-----------------------------------

Updated by Endowus: May 2021

** Disclaimer: Past performance should not be taken as an indication or guarantee of future performance and no representation or warranty, express or implied, is made regarding future performance. Any opinions expressed reflect a judgment at the original date of publication by us and are subject to change without notice.
The prospectus, profile statement, product highlight sheet, fund factsheet or other offer or product documents may contain references about the expected risk tolerance of their target investors. These are in no way indicative of how we at Endowus have assessed your risk tolerance based on your stated objectives and financial situation. Endowus accepts no responsibility for investment decisions made in response to the expected risk tolerance levels mentioned in the product or offer documents.