To sate the increasing appetite of wealthy Americans for esoteric funds, J.P. Morgan & Co. has joined a host of high-end money managers in offering emerging-market debt investments.
The New York-based bank's private client division rolled out the JPM Pierpont Emerging Markets Debt Fund in April with a $100,000 minimum.
The new fund's investment style will mimic that of its four-year-old offshore sibling for foreign investors, who have $123 million invested. The fund's portfolio manager is Eduardo L. Cortes, the vice president who leads the group managing emerging-market debt assets.
Though institutional investors have been fairly enthusiastic about the investments-J.P. Morgan manages $2 billion of assets in emerging-markets debt for all clients-until recently the bank did not see strong enough demand from American individuals.
"It's a more exciting asset class with higher yield and higher return opportunity with less perceived risk than historically because of improvement in markets themselves," said Clive Gershon, vice president of marketing strategy for J.P. Morgan.
The JPM Pierpont fund invests in a assortment of emerging market fixed- income securities: Brady bonds, Eurobonds, bank loans, floating rate-bonds, and notes or commercial paper issued by corporations, banks and governments.
The performance of such securities is causing American investors to take notice.
"We have a tremendous commitment to the emerging markets. We still feel able to identify value on behalf of our clients," said Morris W. Offit, chairman of Offitbank, New York.
Offitbank has offered emerging-market debt investments for over five years and its private clients have $500 million invested in two portfolios overseen by managing director Richard M. Johnston.
"Returns have been extraordinary," Mr. Offit said, adding that while there is no guarantee of future success, "there are still opportunities and I can certainly understand why other firms want to dedicate resources to these markets."
Today, 22 U.S.-based investment managers offering a variety of emerging- market portfolios, either in separate accounts, commingled funds and retail mutual funds, according to Investworks, a division of RogersCasey, a Darien, Conn.-based consulting firm. Yet, only a handful of those have published track records longer than three years.
Chase Manhattan Corp. hopes to offer such a fund to U.S. investors next year, according to Craig Blessing, vice president and head of emerging markets at Chase Asset Management. Its fund for foreign investors, Chase Manhattan Vista International Yield Fund, was up 14.1% for 1996.
The introduction of the J.P. Morgan and Chase funds may not be too late since many wealthy American investors have shied away from emerging-market debt in the past.
"It's been hard for private investors to jump into this area," said Robin Willoughby, research analyst for Russell Private Investment Services, a division of Frank Russell Co., Tacoma, Wash.
"They ask if they should invest in emerging-market debt or, Should I be looking at emerging-market equity?" she added.
Ms. Willoughby's group consults with wealthy people on their investment choices for $6 billion of assets, one-third of which is allocated to alternative investments, such as hedge funds, futures, and emerging-markets debt and equities.
The consultant added that private investors are getting more comfortable with emerging-markets debt because there are more products. "It was an area of confusion because people saw high returns but it was tough to differentiate between an aggressive player and a conservative one," Ms. Willoughby said.
"There were very few funds with long term experience because the area was so new," she added.
Though some private investors may feel they could be late to the game, the money managers remain bullish. "Emerging-markets fixed income has outperformed U.S. equity, U.S. high yield, U.S. Treasuries and EAFE (Europe and Australasia, Far East Equity index) and emerging-market equity over past five years," Mr. Blessing said.
"It's not going to be 16% on average over the next five years, but has a good potential to be 10% to 13%," he added.