Emerging Markets Debt

Emerging Markets Debt: Not Just for the Yield-Seekers

Investors tend to seek emerging market (EM) debt when they need to enhance yield within their fixed income allocations. But a dedicated allocation to EM debt can offer investors much more than yield enhancement alone. Today, volatility has brought dispersion back to these markets, creating new opportunities to invest in assets at attractive valuations.

Growth, complexity, and opportunity on the rise

From 2001 to 2019, EM economies’ share of world gross domestic product (GDP) doubled from approximately 20% to 40%. Among the profound changes has been the evolution of EM capital markets. As debt markets have expanded to over US$20 trillion across three major market segments, so has the accessibility for foreign investors (US$5.9 trillion available). 1

Going forward, EM debt may prove even more attractive as the investable universe has grown and both economies and corporate balance sheets have strengthened.

Emerging Markets Debt Universe – Four Distinct Asset Classes Across More Than 85 Countries

Emerging Market Debt Universe

Source: IMF, Bloomberg, Barclays, JPMorgan and PineBridge Investments as of 31 December 2019. For illustrative purposes only. We are not soliciting or recommending any action based on this material.

However, investors need to understand the risks pertaining to individual EM markets in order to be able to capture these opportunities, as economic and political woes have made headlines and stoked volatility.

Opportunities abound for active management

The opportunistic environment present in EM today, risks and all, allows skilled active managers to excel.

The opportunity set is much larger and more diverse than many people realize. The Investable universe has over 850 issuers and 2400 securities in 86 countries.2 And while ETFs are gaining prominence in the EM debt space, they still have a long way to go in effectively replicating this asset class.

PineBridge, as an active manager with one of the largest and most experienced teams in EM debt, is uniquely positioned to deliver the type of expected outcomes from a broadly diversified opportunity set. This is especially true in an environment where returns will be challenged and dispersion will likely be much greater overall.

1Source: IMF, Bloomberg, Barclays and PineBridge Investments as of 31 December 2019. Global Bond Indices represented by Bloomberg Barclays Global Aggregate Index.
231 December 2019

Trends Driving the Market

Insights
Rethinking the Core in EM Debt
The EM corporate bond market nearly quadrupled in size, while maintaining its overall credit quality, in the last 10 years. So why is it still underrepresented in many fixed income portfolios?

Outlook

White Paper
EM Debt Firmly in the Spotlight for 2020 But Selectivity Remains Key
We believe EM debt is poised to outperform many other segments of fixed income in 2020, supported by fundamentals and strong global demand as investors search for higher yielding assets in a low-growth, late DM cycle environment.

Investing in Emerging Markets Debt

Why Fixed Income Investors Should Consider a Dedicated Allocation to EM Debt

Video
Why Fixed Income Investors Should Consider a Dedicated Allocation to EM Debt
Steve Cook, co-head of Emerging Markets Fixed Income talks about the evolution of EM capital markets, reasons why investors should consider a dedicated allocation to EM debt, and highlights key growth drivers for the asset class.

EM Debt Trends, Prospects and Opportunities

Video
Emerging Markets Debt | Institutional Masterclass
Steve Cook, co-head of EM Fixed Income, dispels misconceptions around emerging markets and shares his insight into areas of opportunity in a panel debate.

EM Debt Trends, Prospects and Opportunities

Video
EM Debt – Trends, Prospects, and Opportunities
Steve Cook takes part in a panel debate hosted by Asset TV on opportunities and prospects for emerging markets.