Do Advisors Want to Increase Emerging Market Bond Allocations?
16 April 2024
Read Time 1 MIN
Emerging market (EM) bonds represent one of the most compelling – and most misunderstood – opportunities for global investors. Despite strong underlying fundamentals and historical performance, EM bonds are frequently under-allocated as a fixed income asset.
Eric Fine recently sat down with Investment News to explain why advisors could take a closer look at this overlooked asset class:
- While there is risk in EM bonds, there is not as much as many advisors and investors believe. This is especially true in the current global economic environment.
- Emerging market fundamentals look compelling relative to developed markets across a range of metrics, including fiscal deficits and current account deficits.
- EM bonds also boast higher yields that significantly outpace developed markets.
- Despite these advantages, a very low percentage of advisors allocate assets to EM debt funds.
Risks associated:
- Emerging Market Risk: Investments in emerging markets may involve specific political, economic and financial risks that have a significant impact on valuations and liquidity of those investments.
- Currency Risk: Some of the Fund's assets can be invested in currencies, other than the Fund’s currency. The performance of the Sub-Fund can be subject to elevated volatility on the downside as well as on the upside due to currency fluctuations.
- Credit Risk: The Fund will invest in bonds that are subject to varying degrees of risk that the issuers of the securities will have their credit ratings downgraded or will default, potentially reducing the value of the securities.
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