The KEF Explainer
The Kudy Eurobond Fund (KEF) was created with the African investor in mind. It was launched in April 2017 with a mission to create an investment vehicle that places customers’ needs first. If you have ever wondered what makes the KEF tick or are new to the world of investing and looking for where to put your money, then this article is for you.
Below, we explain one of Kudy Financials earliest product, the motivations behind creating it, and how it works.
But first, what even is a Eurobond?
Eurobonds are international bonds denominated in a currency other than that of the issuer. Despite being called Eurobonds, these bonds are not necessarily denominated in Euros and often take different forms. To further simplify, you can think of bonds as loans taken out by companies to fund their operations. The KEF is, consequently, a mix of various Eurobonds.
Motivations for the KEF
The target market for KEF is Africans, both on the continent as well as in diaspora, who are seeking to invest in dollar-denominated funds. The fund was created not only for the African investor but also for African companies who need liquidity to support their businesses. The long-term goal of this fund is to channel funds from investors to companies and businesses that require capital within the continent. In that way, this fund and Kudy Financials in general can lend its support to African growth and development.
The fund had initially been focused entirely on bonds in the African continent. However, the COVID pandemic increased the risk exposure of African bonds and to minimize the effects on the fund, we decided to expand investment globally. Currently, the KEF includes bonds from different parts of the world including Latin America, North America, Europe and Southeast Asia. Notwithstanding, the core of the KEF is still hinged largely on African investment.
How the Fund Works
An investor would need to have a minimum of 125,000 USD to invest in the KEF.
The returns on the KEF are non-distributive. This means that the interests are accrued over time and added to the initial investment resulting in compounded returns for investors. As a result of this, the KEF does not have a lock-in period; an investor can exit the fund whenever they want.
How Safe is the KEF?
Our risk management techniques for this fund include:
Global Diversification: the fund is diversified globally to insulate against the occasional dip in regional performance. For example, if South American bonds are facing a downturn, we can rely on the North American and Southeast Asian bonds to maintain the performance of the KEF.
Sector Diversification: this simply means that we invest in different sectors across regions rather than invest in the same sectors. This also serves the same purpose as global diversification where if one sector is experiencing a downturn, we can rely on the performance of other sectors.
Exposure: over time, we have been able to buy additional Eurobonds into the fund. As earlier stated, we started with one bond at the inception of the KEF but have since increased. We are now at a point where the KEF cannot have more than 15% of bonds from a single issue. We are working towards having a maximum of exposure of 5% to a single issue in the next 18–24 months.
Ratings: we do not buy Eurobonds that are not rated by international rating agencies. We buy only internationally rated bonds that have a B rating or higher.
Who are the KEF Service Providers?
The KEF fund custodian is UBA Global Investor Services, and the administrator of the fund Creatrust Sàrl, a Luxembourg based entity. The fund is also registered with the Luxembourg regulatory body known as Commission de Surveillance du Secteur Financier (CSSF).
If the KEF appeals to you and you wish to learn more, please contact us via info@kudy.io. If you are otherwise sold and immediately want to start investing, please go to www.kudy.io to open an account and start investing.
