Emerging Market Debt (EMD) has generally remained one of the best performing asset classes for over 10 years, despite high-profile crises. In our view EMD has the potential to enhance returns, providing diversification benefits for investors. Depending upon an investors investment objectives and risk tolerance we believe that most investors should at least allocate a modest holding to emerging debt, while investors more tolerant of risk should consider a more significant holding.
Our philosophy and process are based on the following key beliefs:
Top-quality research is the key to added value
Application of a rigorous, risk controlled investment process can generate strong returns:
Leverage off wider Aberdeen platform:
Range of product types:
Experienced and dedicated team:
Over the last decade the emerging market debt universe has undergone rapid growth and is becoming more important to a wide range of investors. The reasons behind this are:
Many emerging market countries have implemented sound fiscal and monetary policies. This has resulted in a structural improvement in creditworthiness and has served to reduce considerably the historically high volatility of the asset class.
Emerging market debt, both hard and local currency, offers low correlation to developed markets and emerging market equities and suggests that it has a valuable role to play in portfolio diversification, particularly for portfolios that already have significant stock allocations.
Valuations have improved with emerging market hard currency bond spreads at seven-year highs. This has followed a period of a perceived “flight to quality” into U.S. Treasury Bonds, which paradoxically are offering negligible yields to investors.
Emerging markets long-term growth expectations are supported by solid fundamentals that include positive demographics, economic reform, improving governance and increasing industrialization.
Risk Considerations: Foreign securities are more volatile, harder to price and less liquid than U.S. securities. These risks may be enhanced in emerging market counties.
Fixed income securities are subject to certain risks including, but not limited to interest rate, prepayment, extension and credit risks.
Aberdeen’s strengths in emerging market debt:
Experienced team: Well-resourced and highly experienced team capable of rapid decision making and trade implementation.
We invest across the entire emerging market debt universe: Sovereign and corporate, hard and local currency denominated debt, derivatives and foreign exchange.
Focus on forward-looking scenarios: We believe historic volatility and correlation are not good predictors of risk.
Global resources: We have a strong emerging markets equity presence which gives us insight into companies on a micro level and how the collective performance of a number of corporates in a country can impact a country’s macroeconomic performance.
Tried and tested investment process: A track record of investing in emerging market debt across a series of market cycles.