Getting the most out of emerging market debt

The fast view

• Emerging market (EM) debt is a diverse investment universe underpinned by a wide range of growing economies and companies. But it is under-owned in many portfolios.
• EM fundamentals are robust: over the next few years, EM economic growth is set to outpace developed-market growth by the widest margin in a decade; and EM central banks are now in a strong position to start easing interest rates.
• Recent performance reflects this fundamental strength, yet yields across EM debt asset classes remain very high. This improves the income profile and return outlook while providing a buffer against future volatility.
• EM debt provides portfolio diversification benefits and offers active investors a rich hunting ground, given the diverse behaviour of individual asset classes across the cycle and the large dispersion across markets that sit within these.
• A blended EM debt strategy allows investors to benefit from the divergent dynamics across the asset class while also capturing bottom-up selection opportunities across and within markets.

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