EM Debt: The Benefits of a Blended Approach
The EM debt universe—larger, more diverse, and of higher-quality than generally perceived—offers compelling opportunities today. But given the uncertainties ahead, there are potential benefits to taking a blended approach.
Emerging markets (EM) debt is often referred to as one single homogenous asset class, but in reality, it is a large investment landscape offering a diverse range of opportunities. EM and developing economies (ex-China and Russia) represent a significant 23% of the world’s GDP, or around $24 trillion1, with EM issuers spanning over 90 countries and 1,000 corporates.2 Within this broad universe, there are four distinct opportunity sets: sovereign hard currency, corporate credit, local interest rates, and local currencies.
While EM debt often receives negative headline attention, it would be a mistake to paint the asset class with one broad brush. In fact, for those willing and able to dig deeper, there is significant value to be uncovered across the investment landscape. In this piece, we debunk some of the common misconceptions of this expansive asset class and discuss why a blended approach to investing in EM debt may be beneficial now, more than ever.
1. Source: IMF WEO. As of October 2023.
2. Source: Barings.
