IFC joins debt fund

The International Finance Corp. (IFC), the private sector arm of the World Bank Group, has agreed to make a $30-million investment in the $300-million GEM VII Targeted Value and Income Fund.

Structured as a collateral debt obligation (CDO), GEM VII is the first global emerging market debt fund with the ability to invest in the whole universe of emerging markets fixed income opportunities ranging from distressed, performing and synthetic to local currency instruments.

The fund will target a globally diversified pool of dollar-denominated private sector debt issues, both performing and non-performing. The emerging markets local currency debt would complement the dollar debt.

The fund aims to focus investments on about 33 emerging market countries. It is managed by TCW Asset Management Co. Morgan Stanley was the sole structuring and lead distribution agent of the debt and equity to a globally and institutionally diverse consortium of investors.

"IFC can play an important role by encouraging fixed income fund managers to create new products that modify the risk/return profile of emerging markets assets. This can attract investors who are limited to investment grade securities. Emerging markets corporate debt is still plagued by a lack of transparency, poor recovery mechanisms, and scant structuring knowledge. Participation by top-notch fund managers in this asset class will improve transparency, add buy-side perspective to new issuance, and deepen the investor market." Teresa Barger, IFC director for private equity and investment funds, said.