RBC BlueBay Asset Management’s Emerging Market Credit Alpha Fund delivered a standout 21% return in 2024, significantly outpacing the 14% average for emerging-market (EM) debt hedge funds, according to a report by Bloomberg.

The performance builds on an 18% gain in 2023, marking a strong period for the $600m fund amid challenging market conditions.

The hedge fund, which employs strategies like bond borrowing and short-selling, is poised to capitalise on volatility driven by US policy shifts during President Donald Trump’s second term.

The report quotes Anthony Kettle, Co-Manager of the fund, as saying that: "This year, it’s about the US policy agenda. There will be plenty of idiosyncratic EM events, but US policy will create both long and short opportunities."

Despite a turbulent five years for emerging markets, the RBC BlueBay fund has thrived, achieving annualised net returns of 11% over the period. "Volatility has been key," Kettle said. "We’ve made money on both longs and shorts."

For example, Trump’s tariff threats could disrupt markets, presenting opportunities to acquire assets at discounted prices. "If tariffs create dislocations, the fund can add assets at extremely cheap prices," Kettle noted.

The fund’s strategy focuses on both developed and frontier markets. In Asia, Kettle sees the biggest short opportunities in currencies likely to be impacted by Trump’s tariff agenda, while Mexico could emerge as a medium-term beneficiary of US policies, he added.

In frontier markets like Zambia, Sri Lanka, and Ghana, restructured bonds with resumed coupon payments offer attractive yields. "Investors can harvest yields for one to two years, even if the longer-term outlook is uncertain," Kettle said.