Allianz Global Investors has launched a Singapore dollar bond fund to capture growth in Asian fixed income markets.
The Allianz SGD Income Fund will be overseen by David Tan, CIO for Asia-Pacific fixed income at the firm, and aims to provide a payout of 3-5% per annum, distributed monthly. The fund will mainly invest in investment-grade Singapore dollar-denominated fixed income, along with some high-yield credit and US dollar-denominated bonds.
The firm said that Asia now makes up nearly 80% of new issue allocation for credit, and that the default rates on the region’s high-yield bonds are low relative to other emerging markets. The Singaporean bond market has grown substantially over the past two decades, from SGD 50 billion ($37 billion) in 1996 to SGD 333 billion in 2016.
The Monetary Authority of Singapore is trying to encourage more issuers in the SGD bond market. In June, it announced a system of grants to allow local and foreign companies to obtain ratings from international agencies. Potential issuers can claim up to 100% of the costs of being rated, up to a cap of SGD 400,000 per issuer.
In a press statement, Tan said: ‘Today’s low-yield and uncertain economic backdrop has given rise to a global hunt for income, and we are seeing growing investor demand for solutions that provide attractive and steady yield with some risk protection. Singapore’s strong credit rating and resilient fundamentals paint a strong outlook amidst recent economic growth data which suggests positive signs of recovery.’