Emerging debt is no longer an asset class that simply provides diversification. Nor is it a niche asset class. Many investors now view it as a core portfolio allocation, for both hard currency and local currency debt. Each component within emerging debt is now a broader asset class than US high-yield debt. Total outstanding issuance of emerging debt currently stands at more than USD 18 trillion. As the Chinese market opens up to non-resident investors, the potential for further growth seems considerable.
Emerging market debt (EM debt) has been the subject of much interest over the last few years, but recent volatility has created uncertainty about the asset class. We are convinced that besides offering an attractive return/risk ratio and the potential for high returns, current valuations constitute an attractive entry point.