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Emerging Perspectives

Fate of nations: Why country calls will be key for hard currency debt investors this year

27 January 2020
Author: Thys LouwPortfolio Manager, Fixed Income

The quick view

  • A more stable global growth backdrop makes it unlikely that falling rates can be counted on to push up total returns in hard currency debt portfolios this year.
  • In seeking to deliver solid outcomes for investors, active managers will need to make their country selection work even harder.
  • This means trying to avoid blow-ups, identifying positive reform stories and selectively finding value in a carefully risk-considered way.

Look behind the double-digit total returns and it becomes clear that 2019 was not a straightforward year for many active managers of hard currency debt.

Crises in the likes of Argentina and Lebanon saw many managers wrong-footed in their country picks. But the tide of falling interest rates – against a stubbornly fragile global economic backdrop – drove up total returns, and it did so indiscriminately. In short, duration-derived returns helped to obscure many an active mis-step last year.

However, with tentative signs of steadier economic conditions ahead, it seems unlikely that widespread rate falls can be counted on to gloss over less-successful manager decisions. We expect country selection to return as the dominant driving force of both active (i.e. benchmark-relative) and total returns in 2020.

In a short paper, we share a few case studies from the high-yield part of the investment universe to highlight the opportunities and potential pitfalls active managers will need to navigate to keep their investors happy this year.

Read the paper


Emerging market: These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems.

The value of investments, and any income generated from them, can fall as well as rise.

Thys Louw
Thys Louw Portfolio Manager, Fixed Income

Important information

This content is for informational purposes only and should not be construed as an offer, or solicitation of an offer, to buy or sell securities. All of the views expressed about the markets, securities or companies reflect the personal views of the individual fund manager (or team) named. While opinions stated are honestly held, they are not guarantees and should not be relied on. Investec Asset Management in the normal course of its activities as an international investment manager may already hold or intend to purchase or sell the stocks mentioned on behalf of its clients. The information or opinions provided should not be taken as specific advice on the merits of any investment decision. This content may contain statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, new legislation and regulatory actions, competitive and general economic factors and conditions and the occurrence of unexpected events. Actual outcomes may differ materially from those stated herein.
All rights reserved. Issued by Investec Asset Management, December 2019.

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