Emerging Markets Debt Opportunities
At a Glance
- The investment objective for the strategy is to generate income and provide capital appreciation
- The aim of the portfolio is to effectively and opportunistically allocate capital across the broad EM debt universe, focusing on value anomalies
- Flexible, macro driven approach centered on the EM debt universe
- Blended benchmark consisting of 50% Local Currency Sovereign EM Debt, 25% Hard Currency Sovereign Debt, 25% EM Corporate Debt
Objective
We strive to generate income and provide principal growth through capital appreciation when market conditions permit. Our goal is to outperform the benchmark by 1.5% (net of fees), on an average annual basis, over rolling five-year periods.
Benchmark
Blended benchmark consisting of 50% Local Currency Sovereign Emerging Market (EM) Debt, 25% Hard Currency Sovereign Debt, 25% EM Corporate Debt (50% JPM GBI-EM Global Diversified, 25% JPM EMBI Global Diversified, 25% JPM CEMBI Broad Diversified).
Universe
The majority of the portfolio will be invested in sectors of the EM debt markets, including hard and local sovereign EM debt and hard and local currency corporate debt. The strategy has a limited ability to own exposures in select developed markets primarily for defensive or hedging purposes. The portfolio may contain limited amounts of G-3 duration (long and/or short).
Investment Process Summary
We follow a value-driven process that seeks to identify undervalued assets globally by utilizing a top-down macroeconomic framework married with a fundamental assessment of sovereign and corporate issuance. We structure portfolios along macroeconomic themes involving business cycle analysis, inflation trends, monetary policies, and political, social, environmental risks. We actively manage our currency exposures and focus on owning undervalued currencies with the potential for appreciation. We hedge currencies that we believe are overvalued or pose downside risk.
Strategy Differentiation
Dual Approach
Marries valuation and macro research with fundamental analysis at the sovereign and corporate levels.
Holistic Management
The strategy is not managed in independent sleeves that are bolted together. The team evaluates valuation and macro research across the EM debt universe and functions as an asset allocator across the broad EM debt space.
Flexible and Dynamic
By combining sovereign, currency, sector, and security research with macroeconomic analysis, the team dynamically rotates positioning over the business cycle.
Unconstrained Yet Measured
Not biased to local currency or hard currency, emerging sovereign debt or emerging corporate debt, we simply seek value with a macro catalyst. The investment team implements its process within a tracking error framework, allowing for a flexible approach that keeps within the spirit of the overall mandate.