Author: Gordon Platt
California’s San Bernardino County’s employees’ retirement plan awarded a $125 million mandate in October to London-based Ashmore Investment Management for investment in emerging market local-currency debt.

“All our central bank clients and the majority of our pension fund clients now invest in local-currency debt,” says Jerome Booth, head of research at Ashmore. He says such debt offers a natural hedge against dollar weakness.

The subprime crisis could result in significant EM currency appreciation over the next 12 months, as global central banks and others stop buying as much US and European assets, Booth says.

Tim Barrett, chief investment officer of the San Bernardino retirement plan, says that investing in local-currency debt complements the plan’s exposure to dollar-denominated EM debt. “Emerging market debt in general is something we see as adding both return and diversification to our entire fixed-income portfolio, particularly given recent turmoil in US and European credit markets,” he says.

Ashmore is a specialized EM asset manager. The allocation by the California-based plan will be into Ashmore’s Local Currency Fund, a co-mingled fund catering to US institutional clients.

Gordon Platt