- Aberdeen Asset Management
- U.S. Institutional Investments
- Fixed Income
- Emerging Market Debt
Emerging Market Debt
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. 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.
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Our philosophy and process are based on the following key beliefs:
Top-quality research is the key to added value
- Independent proprietary research; detailed research notes completed for each credit
- Focus on country and corporate fundamentals, market structural analysis
- Analysis of entire emerging market universe; hard & local currency sovereign debt, foreign exchange, corporates and credit derivatives
Application of a rigorous, risk controlled investment process generates strong returns:
- Focus on forward-looking scenarios
- We believe historic volatility and correlation are not good predictors of risk
Leverage off wider Aberdeen platform:
- Asian debt team in Singapore and Bangkok
- Global emerging market equity team
- High-yield team in Philadelphia for credit input
Range of product types:
- Hard currency (US$ denominated), local currency, blended portfolios and closed-end funds
Experienced and dedicated team:
- Our EMD team has a total of over 60 years combined experience in the asset class across a series of functions in the industry including asset management, hedge fund management, research and trading
The Case for Emerging Market Debt
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:
Improving credit quality has led to greater liquidity
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.
Significant diversification benefits
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.
Attractive valuations
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.
Positive outlook
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.
Why Aberdeen for EMD?
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 proven track record of investing in emerging market debt across a series of market cycles.