EMD investors look at blended strategies
Emerging market debt investors are increasingly turning towards ‘blended’ strategies that include local and hard currency as well as corporate bonds, according to investment implementation specialist consultant bfinance.
Although the number of blended EMD funds trebled since 2009, while specific local and hard currency EMD funds doubled, investors still struggled with the implementation of such strategies, the firm said.
Additionally, the performance analysis within blended emerging market debt was particularly difficult due to the wide variety of benchmarks and the presence of absolute return strategies (32 per cent) making benchmark-relative performance analysis unfeasible.
Also, in emerging market debt the use of local versus hard currency bonds dictated performance which helped drive a “dramatic increase” in blended EMD strategies.
According to bfinance, in 2009-12 a shift in appetite from local currency towards hard currency happened which translated into blended strategies that combined different EMD sub-sectors.
Bfinance’s head of public markets and managing director, Mathias Neidert said: “We have seen a very significant increase in emerging market debt searches in 2017, much of which has been directed towards blended strategies.
“With the trend appearing likely to continue, this seemed to be an opportune time to share some detailed scrutiny of the blended EMD sub-sector.
“Only a minority of managers in this space are doing what I would call true top-down tactical allocation for local currency, hard currency and (where relevant) corporate debt: more are taking a bottom-up approach and, in a lot of cases, these weightings aren’t changing a great deal through time.”
AUTHOR
Oksana Patron
Recommended for you
First Sentier Investors chief executive, Mark Steinberg, is set to depart the asset manager after seven years.
Metrics Credit Partners has completed the acquisition of Taurus Finance Group and BC Investment Group as it looks to launch consumer lending arm Navalo.
AMP has announced to the ASX that it is being sued by property fund manager Dexus regarding the sale of its real estate and domestic infrastructure equity business.
Having seen inflows of US$5.6 billion to its fixed income funds in the last quarter, Janus Henderson has closed on a deal with life insurer Guardian to secure funds to boost its product development.
