Goldman Sachs Asset Management Introduces Local Emerging Markets Debt Fund
New York, February 19, 2008 – Goldman Sachs Asset Management (GSAM) announces the introduction of the Goldman Sachs Local Emerging Markets Debt Fund (Class A: GAMDX), which seeks a high level of total return consisting of income and capital appreciation by investing in sovereign and corporate debt denominated in the currency of the issuer. The Fund provides a vehicle to tap into GSAM’s belief that such debt represents the next stage in the lifecycle of emerging markets debt. The new Fund will be managed by the same team that heads the Goldman Sachs Emerging Markets Debt Fund (CLASS A: GSDAX) launched in August, 2003.
Portfolio manager Owi Ruivivar, one of four co-managers of both Goldman Sachs emerging markets funds’, points to a “transforming opportunity” that the Goldman Sachs Local Emerging Market Debt Fund is designed to capitalize on. “There has been a remarkable transformation of local debt markets in emerging market economies over the last few years. Local markets have deepened and become more liquid. As a result of the sound economic policies developing in these emerging market countries, the investor base has diversified beyond the conventional domestic banking sector to include foreign and local institutions, including pension plans, hedge funds and insurance companies,” Ms. Ruivivar says.
Improving economic fundamentals and macro-stabilization programs in emerging market countries, including prudent fiscal policies, credible monetary policies and floating currencies to protect countries from external shocks, have contributed to the overall reduction in sovereign debt risk and volatility and have laid the groundwork for greater local markets’ issuance.
GSAM believes this new asset class can offer investors several benefits, including: increased diversification with a low correlation to other assets classes; compelling risk/return characteristics compared to external emerging markets as well as other asset classes; and a growth opportunity, as evidenced by the five-fold increase in market value over the last five years of the JP Morgan Global Bond Index – Emerging Markets (GBI-EM), which includes 14 countries and is the benchmark for the Goldman Sachs Local Emerging Markets Debt Fund.
According to GSAM, the Goldman Sachs Local Emerging Markets Debt Fund and Goldman Sachs Emerging Markets Debt Funds are well suited satellites in a “Core and Satellite” investment strategy. In a Core and Satellite strategy, equity market and interest rate risk are allocated to a portfolio’s core, which includes diversification and low volatility, while less correlated active risk is allocated to complementary or satellite investments, which feature active, skilled portfolio management. The result is a better, more efficient portfolio construction with a higher return potential.
The Goldman Sachs Local Emerging Markets Debt Fund is offered in A and C shares, both which have a $1,000 minimum investment requirement. The Fund also offers Institutional and Class I shares.
GSAM’s Global Fixed Income Investment Management Team manages approximately $200 billion in municipal and taxable fixed income assets for retail, institutional and high net worth clients, with over $2.5 billion in emerging markets debt as of December 31, 2007.
Goldman Sachs Funds, the mutual fund family of Goldman Sachs Asset Management (GSAM), offers individual and institutional investors a wide range of long-term investment choices among over 65 equity, fixed income and hybrid funds. The Family’s line of global products, created by 11 independent and distinct GSAM portfolio teams and supported by over 280 GSAM research professionals around the world, provides both core and satellite investments across asset classes, investment styles, investment approaches and geographical regions.
Goldman Sachs Asset Management is the asset management arm of The Goldman Sachs Group, Inc. (NYSE: GS), which manages more than $868 billion as of November 30, 2007. Goldman Sachs Asset Management has been providing discretionary investment advisory services since 1989 and has investment professionals in all major financial centers around the world. The company offers investment strategies across a broad range of asset classes to institutional and individual clients globally. Founded in 1869, Goldman Sachs is leading global investment banking, securities and investment management firm.
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The Local Emerging Markets Debt Fund's investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The majority of the countries in which the Fund invests have sovereign ratings that are below investment grade or are unrated. High yield, lower rated securities involve greater price volatility and present greater risks than higher rated fixed income securities. Fixed income securities of emerging countries are less liquid, are subject to greater price volatility and will be subject to the risks of currency fluctuations and sudden economic or political developments.
The securities markets of emerging countries have less government regulation and are subject to less extensive accounting and financial reporting requirements than the markets of more developed countries. The Fund may also engage in foreign currency transactions for hedging purposes including cross hedging or for speculative purposes. Forward foreign currency exchange contracts are subject to the risk that the counterparty to the contract will default on its obligations. The Fund is subject to concentration risk and it may subject the Fund to greater losses than if it was less concentrated in a particular country or region. The Fund is also subject to the risk that the issuers of sovereign debt or the government authorities that control the payment of debt may be unable or unwilling to repay principal or interest when due. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, option on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; the risk of default by a counterparty, and the risk that transactions may not be liquid. The Fund is non-diversified and may invest more of its assets in fewer issuers than diversified funds and may be more susceptible to adverse developments affecting any single issuer held in its portfolio and may be susceptible to greater losses because of these developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all.
JP Morgan Government Bond Index – Emerging Markets Global Diversified Index is an unmanaged index of debt instruments of 14 Emerging Countries. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
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