August 2021 – Elections at their best

Portfolio Manager comment Coeli Frontier Markets Fixed Income August 2021

The fund had positive performance of 1.51% gross of fees quarter to date (July and August).  August was defined by +20% performance in Zambia’s bonds and general demand for risk at month end following calming comments regarding tapering and inflation fears from the US Federal Reserve chairman, Jerome Powell.

The sentiment in frontier markets was further stimulated by the approval and distribution of the IMF’s $650 billion of Special Drawing Rights during the month. We await details of how the re-distribution of $100 billion from the G7 towards the weakest nations will be approached.

Frontier markets in August were defined by the unexpected developments in Zambia. The opposition candidate, Hakainde Hichilema (“HH”), won the presidential election and not least, as the results were gracefully accepted by the incumbent. HH is a business man and has campaigned on transparency and market friendly actions. Following his win, he reiterated intentions to agree on a program with the IMF as soon as possible. This has resulted in the Eurobonds returning over 20% in August. Since the elections the local currency, the Kwacha, has been the best performing currency globally, now having appreciated 32% year to date versus the US dollar.


Historically, Zambia has had among the better track records in terms of democracy in Africa but it has been heavily tainted by excessive borrowing and the default on its bonds in 2020. Zambia is rated D and Ca by S&P and Moody’s respectively. Once a restructuring of its debt is agreed, Zambia has the potential to become the new darling recovery story in frontier markets.

The fund currently holds 3.7% in Zambian bonds. It has been the funds highest risk position in relative terms.

During the month we have also seen some of our July underperformers come back and perform ahead of the universe. This included El Salvador, Sri Lanka and Tunisia, which however still remain the weakest positions on a quarter to date basis.

In Tunisia, we continue to await a new government to be formed. The president has in the meantime continued his focus on the corruption agenda in the country with his rating polls remaining very high.

During the month we have added to our exposures in Kenya, Pakistan and Senegal. We funded these changes by fully exiting our position in Jamaica.

On the ESG front, we have initiated our first engagement with an African issuer in order to encourage future use of sustainable bonds. More details to follow on completion of the engagement.

The largest positions in the fund are Ghana, Nigeria, and Sri Lanka. Our current top-down spread risk level is at 119%. The fund has a yield of just short of 8%. Our cash balance has increased at actual month end and we expect to deploy it as new issuance in our space resumes.

With renewed focus on increasing interest rates in the US we expect continued interest in the high yielding fixed income space including our frontier markets niche.

Fund metrics 1) Fund NEXGEM 2)
Total fund assets (USDm) 38
Yield to worst (%) 7.8 6.7
Spread (bps) 689 579
Running yield (%) 6.5 6.9
Spread duration (years) 5.5 6.0
Number of countries 32 36
Number of bonds 72 146


Performance (short term) MTD QTD
Fund (gross of fees) 1.81% 1.51%
Fund (I USD) 1.73% 1.34%
Benchmark (NEXGEM) 1.26% 1.27%
Performance (long term) Since launch
Fund (gross of fees) 5.74%
Fund (I USD) 5.31%
Benchmark (NEXGEM) 5.42%


1) As of end of June 2021, using weighted average data from JPM Morgan, Bloomberg, Coeli; proforma for any transactions completed before month end
2) NEXGEM refers to the Fund benchmark JPM NEXGEM

Fund Overview
Fund manager Maciej Woznica and Lars Krabbe
Base currency USD
Benchmark  JPM NEXGEM
Share class I USD launch date 31 / 03 / 2021
Inception date 29 / 03 / 2021
NAV valuation point 16.00 CET
I USD ISIN LU2273160551
I USD management fee 0.75%
KIID Risk category 5 of 7
Instrument Types
Sovereign HC 78% 95%
Quasi Sovereign 7% 5%
Cash & FX 5%
Corporate 5%
Supranational LC 3%
Sovereign LC 2%
Supranational HC 1%
Instrument Objectives

The fund aims to provide returns by investing in bonds from Frontier Markets, the younger and less developed fixed income markets within the Emerging Markets segment. The fund’s objective is to outperform the JPM NEXGEM index by at least 75bps p.a.

Investment Universe

The core investment universe is represented by 36 countries as defined by the JPM NEXGEM index and is expanded by an additional 62 frontier countries where the World Bank is active. The fund will invest in hard currency sovereign bonds, quasi-sovereign bonds and selectively local currency bonds and corporate bonds. The majority of the fund’s investments are rated high yield.

Investment Process

The investment process focuses on selecting country exposures with positive momentum in terms of their economy, funding and politics. The process further aims to capture premiums from curve roll-downs, quasisovereigns, new issues and benchmark changes.

DISCLAIMER. This is a marketing communication.

Before making any final investment decisions, please refer to the prospectus of Coeli SICAV I, its Annual Report, and the KIID of the relevant Sub-Fund. Relevant information documents are available in English at A summary of investor rights will be available at

Past performance is not a guarantee of future returns. The price of the investment may go up or down and an investor may not get back the amount originally invested.

Neither past performance nor simulated performance is an indicator or a guarantee of future performance Estimates of future returns should not be construed as a guarantee of future performance The value of bonds in the Fund and income received from it can go down as well as up, and investors may not get back the full amount invested. This material is not intended to be distributed in the USA or other countries where the content or the distribution may be prohibited The fund described herein may not be offered or sold to US citizens or residents of the USA or to a corporate, partnership or other entity created or organized in or under the law of the USA Although the information has been based on sources deemed be reliable, Coeli cannot guarantee its accuracy and assumes no liability whatsoever for incorrect or missing information nor for any loss, damage or claim arising from the use of the information in this material.