Claudia Calich, manager of the £647.9m M&G Emerging Markets Bond fund, has been buying into opportunities created by the escalating US-China trade war.
The manager began reducing exposure to local currency instruments in the summer of 2018 on the view the trade battle between the US and China would cause some of the currencies to underperform, for example currencies "at the epicentre of the storm" such as Asian currencies (currently 7%), as well as riskier currencies and those dependent on commodities, such as South Africa (a 1% position).
Calich said she has maintained this position for most of this year, rotating "a little bit within some of the currencies", including adding to the portfolio's Ukrainian positions, "so we are overweight in the country".
Ukraine is among the top ten largest issuers in the fund at 2.5%, according to the July factsheet.
Calich, whose deputy on the fund is Charles De Quinsonas, said they had maintained a neutral position in hard and local currency for most of this year in the portfolio.
"For us, neutral is having 30%, roughly, of local currency exposure, so the remaining two-thirds is roughly either bonds denominated in US dollars or occasionally it will be in bonds denominated in euros," she added.
Local versus hard currency this year has been an important call, according to Calich.
She added that avoiding some of the "really deep underperformers", such as Lebanese bonds, had helped the fund's performance in the past year, as had repositioning in Argentina following a trip there in April.
Calich said: "Even though I did not move underweight in Argentina, I moved from an overweight to a more neutral position over the past three or four months, so that helped [performance] a bit."
The fund currently has a 0.5% 'residual' weighting in the Argentine peso.
Having increased exposure to Chinese bonds to 3% at the end of 2018, the manager reduced that to 1% in the second quarter of this year on the back of a rally.
More recently, Calich said she had slowly begun adding to China, "given the trade tensions have increased once again" and there had been some underperformance, but she confirmed that the fund remained underweight China at 1.5%.
Over the past 12 months to 23 September the fund has generated a 20.6% return, ahead of the IA Global Emerging Markets Bond sector average of 14.2%, FE Analytics shows.