Insto investors missing emerging bond opportunity
Institutional investors need to look at emerging market debt as a separate asset class than global bonds, Van Eck believes.
Van Eck emerging markets bond strategy portfolio manager, Eric Fine, said many institutional investors were underweight in emerging market debt, as a result of restrictive strategies.
"The problem with this approach is that global bond strategies do not provide optimal exposure to emerging markets bonds because they have constraints that limit allocations or exclude certain emerging markets debt sectors," he said.
"The emerging markets trend regression line has consistently higher spreads for hard currency debt and higher real yields for local currency debt than the spread and real yield for the same-rated developed market debt."
Fine said that contrary to conventional wisdom, emerging markets bonds may have similar if not superior liquidity compared to the US high yield and US investment grade bonds that dominate global bond funds.
While he agreed that illiquidity remained a risk for emerging markets corporate and sovereign debt, he said, "It is not clear illiquidity in EM debt is any greater risk relative to developed markets such as US high yield and investment grade debt."
AUTHOR
Nicholas O'Donoghue
Recommended for you
The $673 billion global investment manager has appointed a former Zenith sales head as it seeks to expand its reach in the Australian wealth management market.
Fund managers may be operating in a squeezed environment, but a salary guide shows they are willing to pay up for specialist talent to diversify their fund range.
Reach Alternative Investments has entered into a strategic partnership with Russell Investments to bolster its wholesale private markets offering for financial advisers and investors.
Boutique investment consulting and research house Genium Investment Partners has announced a senior appointment to drive further growth in its research ratings business.
