Asean-backed bonds set to attract pension funds

BANGKOK: South-East Asia’s first plan to back corporate bonds will lure pension funds seeking higher yields from investment-grade debt, according to Prudential Plc and PineBridge Investments LLC.

The AA+ rated Credit Guarantee & Investment Facility, formed by the Association of South-East Asian Nations along with Japan, China and South Korea, began operations this month and would help sell two or three notes by Sept 30, chief executive officer Kiyoshi Nishimura said.

That might include junk-rated debt to help attract new issuers, he said. PineBridge Investments’ Taiwan unit said it would consider buying such securities.

Investors are shifting funds from markets offering near-zero interest rates in Europe and the United States into higher-yielding bonds, adding US$21bil to emerging-market debt holdings in 2012, according to USbased EPFR Global.

East Asia’s local-currency corporate bond market grew 17% in the quarter ended December to a record US$1.9 trillion, according to the Asian Development Bank, which helped set up the guarantee programme.

“Any form of agency-guaranteed debt is a good thing as we are generally more cautious on corporate risks,” said Boon Peng Ooi, the Singapore-based chief investment officer of fixed income who oversees US$16bil at Prudential’s Eastspring Investments Singapore Ltd.

“The more people you attract, the more buzz and talking you create and you can build the market.” — Bloomberg