• 11/09/2017

Experience Pays for Asian Fixed Income Specialist

Experience Pays for Asian Fixed Income Specialist

Emil Nguy

Emil Nguy, CIO of Income Partners, co-founded the firm in 1993 with Francis Tjia.  Emil draws upon his vast expertise and experience, after nearly 30 years in investment management, focusing his energies on new product development, key client management, asset allocation across liquid strategies and macro risk management. Emil is particularly adept at navigating successfully through periods of economic uncertainty in order to protect client capital. He is renowned in the industry for his ability to interpret market signals and analyse economic data to position investments for out-performance. Emil’s client-centric approach to business has enabled him to develop and maintain an exceptional track record of achieving long-term results for his clients across various asset classes.

The Co-Founder of Income Partners, winner of the Best-In-Class award for Asia Fixed Income, is quite clear about the reasons for its success. The key ingredient is not the process – it is the people.

“Asset management is a people business,” says Co-Founder and Chief Investment Officer Emil Nguy. “Investment performance, processes and philosophies are all a reflection of the investment team’s discipline, skill and experience. Our ability to manage our human capital is ultimately the key reason for our continued success.”

The company is a local success story, having been established 21 years ago and ridden out the highs and lows in the last two decades. Having gained such a wealth of investment experience in Asia, including credit, rates, currency and duration management, Nguy says, “Our investment philosophy is simple, and it drives our overall investment process – to achieve the best risk-adjusted results for our clients. We have consistently outperformed the market during the major economic downturns over the last two decades, a testament to our disciplined approach in our portfolio monitoring and risk management process.”

The company has extensive experience and a track record in managing Asian credit portfolios since 1993. It is responsible for Asia’s longest standing Asian credit hedge fund, with a 13-year track record, consistently outperforming the market, particularly during the major economic downturns over the last two decades.

Minimising downside

In common with other managers who have seen the lows as well as the highs, Income Partners pays a lot of attention to risk management and minimising investors’ losses. “Our track record of losing significantly less than the index during down markets is a testament to our disciplinary approach to our investment philosophy”, says Emil. “We seek to achieve our investment objectives through our rigorous fundamental credit research, investing only in businesses we understand, and leveraging on the experience of our investment team to navigate through the different credit cycles; and by managing risks through our investment process and procedures, as well as through top down macro, systemic and portfolio risk management strategies and limits.”

To construct a well-diversified bond portfolio, having an information edge in terms of analysing credit risk is one of the keys to the success of Income Partners’ approach. “As part of our credit selection, some of the areas that we focus on to develop conviction ideas include: industry analysis, company valuation, relative value, transaction terms and structure, and technical,” says Emil.   

“As part of our top-down research process, we also actively manage sector exposures for our portfolios by considering macro-economic conditions, industry dynamics and policy directions in each market.  We also look at sector allocation on both an absolute and relative basis.  Risk and overall exposures are also actively scaled, based on market conditions and views.”

Supporting the firm’s efforts to minimise downside for investors, Income Partners operates a robust risk management framework, which considers issues such as portfolio concentration, stress testing for macro scenarios, counterparty management and duration monitoring. In addition, the firm follows a strict sell discipline to minimise overall portfolio risk.  Emil says, “To protect against downside volatility in the market, we use hedging and overlay strategies.  Exposures may be fine-tuned/adjusted at the portfolio level using standard tools such as swaps, forwards and futures. These tools and hedging strategies are used to minimise risk exposures as opposed to increase risk exposure for return enhancement.” 

“For example, absolute return strategies may use credit derivatives to efficiently add or reduce credit market risks. Or they may take a medium-term fundamental macro view on rates and currencies. Use of liquid swaps, forwards and futures is also an option, to ensure that overlay strategies can be executed under various market conditions. Interest rate swaps and futures may also be utilised to manage/adjust duration exposures. For the long-only Renminbi (“RMB”) strategies, hedging activity is typically limited to currency forwards and futures which may be used to ensure optimal exposure to RMB,” Emil adds.

China expertise

To ensure it was properly set-up to construct and manage RMB bond portfolios, Income Partners’ culture of “investing in what we understand” led them to establish a Beijing research office in 2008. “In anticipation of the enormous investment potential of RMB bonds, our team of research analysts spent years building our own fundamental research data and knowledge base of Chinese issuers and industries.”

“For non-rated credits, we have our own internal rating system consistent with international rating agencies. The rating process considers both the issuer’s business and financial risks. This is particularly important when selecting credits for our RMB portfolios, due to the lack of international ratings for many Chinese credits that do not issue in USD. With the help of our internal credit ratings, we are better informed of the underlying credit risks, fair pricing and relative values of unrated credits.”

Income Partners was one of the pioneer asset managers in offshore RMB bond investments, launching the first pure investment grade RMB fund to the market, and the first manager to introduce a “Reverse enquiry model” in Asia when there was limited supply of quality credits in the market back in 2010. It has an excellent track record of zero credit defaults in its offshore RMB portfolios. It was also the first non-bank, independent asset manager to be granted a RQFII license in 2013 by the Chinese regulators, and to launch an onshore China RMB Bond Strategy under the RQFII program in 2014.

Income Partners can rightly claim to have one of the most stable and experienced Asian fixed income teams. Ownership of the firm is stable and the two co-founders, Emil Nguy and Francis Tjia, remain the lynchpins of the management team, as CIO and CEO respectively. This is underpinned by members of the core portfolio management team, who between them have an average of 18.4 years investment experience, of which 14.5 years are with Income Partners. Its external network is also strong, providing an edge in research, due-diligence and deal sourcing for clients. BM