Rapid Evolution - 10 Years of Investing in Emerging Market Local Debt

In the decade since we launched our Emerging Markets Local Currency Bond Strategy, the asset class has evolved at what at times has seemed like a breathtaking pace. 


Our experiences over that time have confirmed our view that the most effective way to invest in emerging markets (EM) local debt is through active management, for three main reasons: (1) to take advantage of non-benchmark opportunities, (2) to benefit from differences in interest rate cycles between countries, and (3) to reduce currency risk. 


We believe the factors that have given active management an edge over passive approaches to EM debt over the past decade will persist for the foreseeable future. 


Growth dispersion between emerging markets countries looks set to continue, while inflation divergence between nations at different cyclical stages is also likely to remain. As long as this differentiation between EM countries is maintained, opportunities will continue to arise, providing active managers with greater flexibility to generate stronger returns.