You may have missed the boat on EMD

Added 3rd June 2016

Investors looking at emerging market debt now, may well have missed the boat, said Steve Drew head of emerging market credit at Henderson Global Investors.

You may have missed the boat on EMD

While he still sees opportunity within the sector, he believes those investors who missed the 20% per annum growth trajectory and are still looking for it is looking in the wrong direction.

“I think you have to go back to 2013 and the taper tantrum to get some perspective of where we are now. We saw a lot of non-dedicated money leave the asset class. On the plus side, their departure means there is less volatility in asset flows  and therefore less volatility over all in the asset class.

“Emerging Markets has this reputation for having lots of volatility and lack of liquidity but that couldn’t be further from the truth, it is an investment grade asset class that has grown out of having been a high yield asset class 10 years ago,” he added, pointing out that more than 50% of the issues the firm invests in now are quasi sovereign

And, he said, for the sector as a whole, the volatility last year was half that of the US Investment Grade sector, but still yielded more than the US High Yield Sector.

Part of the reason for this, he says, is that the US dollar denominated emerging market corporate space has gone through something similar to what happened in the US investment grade market in the 1990s – massive, total diintermediation of the local banking system and a proliferation of deals, largely out of Asia , that have taken the investible universe from 300 names to 1300 names over the last five or six years.

And, he added, typically when deals come to the market, they often have to come cheap because they are not names known outside their domestic universe.”

Looking forward, he said, in terms of return, given that the market is up around 5% already in 2016, the year is likely to be, at best, a carry year.

In terms of flow, however, he said, there might be a bit of an issue, as he expects it to be the first negative net supply year in 15 years.

Kames Income Hub


Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

Matthews Asia Funds Asia Dividend
Matthews Asia Funds Asia Dividend...

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Geoff Candy

Group digital editor

Geoff Candy joined Portfolio Adviser as News Editor in May 2014. He has been a financial journalist and broadcaster since 2005 and, in that time has worked in both South Africa and the Netherlands, covering everything from high street retailers and construction companies to mining and insurance.



Investment Strategy




PA Channel Island 2016
PA Channel Island 2016

8th November 2016
The Royal Yacht, Jersey


17th November 2016
The Andaz

PA Emerging Markets 2016
PA Emerging Markets 2016

1st December 2016
The Mayfair, London

Sponsored Content

Investment Strategy