Ask The Experts: Emerging Market Debt In Good Spot For Quality And Yield
Jim Cielinski, Head of Fixed Income at Threadneedle Investments shares his outlook for emerging market debt as well as the investment decisions undertaken by the Threadneedle Emerging Market Debt Fund.
What is the outlook for emerging market debt over the next two to three years?
- Positive on emerging market debt whether it's local currency bonds or external currency bonds
- Continue to see strong demand from clients for assets that provide yield with some relative safety
- Emerging markets with their healthy surpluses and minimal default losses are in a good spot to provide these yields to investors
- Over the next two to three years, emerging market debt will become a very high-quality asset class that provides generous yields
Can you tell us a bit more about the investment objective and strategy of the Threadneedle Emerging Market Debt Fund?
- Fund primarily invests in external currency, usually US dollar denominated emerging market securities
- Able to invest in both investment grade and non-investment grade debt, with a focus on sovereign debt
- Aims to deliver a diversified portfolio with good yield levels
- Value addition through relative value picks
Mexico and Russia are the only 2 countries with more than 10% weighting based on the fund's latest factsheet. What are the reasons for this allocation?
- Both are large markets in the emerging market space and offer relatively higher quality
- Fund sees significant value in both Mexico and Russia as well
Is there any investment idea the fund is positive on right now?
- Fund is positive on Brazilian bonds
- Also positive on certain Asian countries such as Indonesia and Malaysia
- Fund is underweight Eastern European market due to its vulnerability to the eurozone and its related problems
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