The study was conducted among 86 international institutional investors in July and August 2016.
A quarter (25%) of investors believe that the repercussions of Brexit will have a positive effect on the attractiveness of EMD as an asset class, while another 25% pointed to the prospect of a Federal Reserve rate rise as also likely to have an impact.
The study also revealed that investors’ biggest concerns regarding the EMD market are political uncertainty (44%), closely followed by credit quality (42%). Nonetheless, more than half (54%) of fund managers reported that they expect institutional investors’ allocations to EMD to increase over the next three years.
“EMD continues to gain traction among investors who are attracted by its diversification benefits, particularly in the light of current ‘big’ events in developed markets such as the impact of Brexit on the rest of the EU and also possible Fed rate rises,” said Marco Ruijer, lead portfolio manager for EMD at NN Investment Partners.