At the end of May, the Fund’s 2026 YTD returns (USD N Accumulation share class) stood at +3.82% versus the JACI HY benchmark of +3.01%. At the time of writing (15 June), the Fund’s YTD returns climbed to 4.67%.
We have began to realise gains on our largest long-held position in the fund, Vedanta (India’s largest commodity firm; USD 35bn) and have reduced it from the No. 1 position, representing 7–8% of fund weight to No. 6 position currently at 3.5% fund weight. The bonds have had another round of rating upgrades, bringing the total upgrade to seven notches over the past two years. The firm has now issued a tender offer to redeem these high-coupon bonds at levels we deem attractive. As such, we are selling them at those levels, with a yield-to-call below 7% and redeploying capital elsewhere.
We have also taken profit (in part or full) on other strong performers such as Fosun 2028, Sasol 2033, Ivory Coast 2037, Nigeria 2034 and Egypt 2032. Instead, we have utilised market weakness in Indonesia to add to Bank Negara 7.125% AT1 and Garuda Airlines 2031 paper at 9%-10% yields. Garuda Airlines has recently received an injection of up to USD 1.4bn from its parent, the new Indonesian sovereign wealth fund named Danantara. With the end of the Iran conflict, we expect lower oil and jet-kerosene prices which will further aid the profitability and cash flow of the airline.
In India, we added to the new issue of India Infoline 7.6% 2029 bonds. The fund already holds the 2028 maturity tranche of India Infoline, a Mumbai-based financial lender that provides consumers with gold loans and other asset-backed loans, and is active in the mid-sized corporate lending market. We now have increased the issuer to 4% of fund weight making it the fifth-largest position in the fund. We see this as a long-term core holding of the fund, given its high-quality management and stable business.
Elsewhere, we increased short-dated bonds (Jan 2027) of New World Development in Hong Kong. The bonds are around 95-96c for Jan 2027 paper (i.e. seven months away) but provide an 11% yield to maturity for senior bonds. We think this is materially mispriced given the asset and cash flow strength of the firm, which we expect will be able to redeem this small bond easily. New World is now the fund’s largest position (including tactical positions), as we continue to expect considerable alpha generation from this complex.
The fund also benefited from strong performance in our Softbank bonds (BB+ rated) driven by the strong increase in the value of Softbank Group’s underlying businesses and investments. Softbank is now Japan’s largest company by market cap ($252bn), having overtaken Toyota. Softbank is benefiting from significant growth of its 85% stake in Arm semiconductor ($440bn) which itself has increased fourfold in value this year. Additionally, Softbank’s stake in OpenAI (they own >10%) has also soared this year. Based on sum-of-the-parts valuation, we continue to think various bonds on the Softbank curve remain cheap and have further upside.
At the time of writing, the fund has a yield-to-worst (YTW) of approximately 8.8%, a modest 3.2-year duration and portfolio ratings of BB-. The resolution of the Iran conflict will provide a further boost to the Asia & EM HY USD markets, and we aim to benefit from strong valuations and better corporate fundamentals in 2H 2026.
We appreciate your support, and please do not hesitate to contact us with your queries and feedback.
DHIRAJ BAJAJ
On behalf of LOIM Asia Fixed Income team
share.