Navigation Search

Select your location and role to view strategy and fund content

  • Global homepage
  • Australia
  • Belgique
  • Botswana
  • Denmark
  • Deutschland
  • España
  • Finland (Suomi)
  • France
  • Hong Kong (香港)
  • Ireland
  • Italia
  • Luxembourg
  • Namibia
  • Nederland
  • Norway
  • Österreich
  • Portugal
  • Singapore
  • South Africa
  • Sweden (Sverige)
  • Switzerland
  • United Kingdom
  • United States
  • International
Professional Investor
  • Professional Investor

Tailored for investment professionals this site provides information on our products, strategies and services. Please remember capital is at risk and past performance is not a guide to the future.

By entering you agree to our Terms & Conditions
Emerging Perspectives

What can past market regimes tell us about the next chapter for EM debt?

12 February 2019
Authors: Mike HugmanPortfolio Manager, Peter EerdmansHead of Fixed Income and Co-Head of EM Sovereign & FX

With the US economy cooling and interest rates approaching a likely peak, a new cycle in emerging markets is drawing near. How should investors approach it? In a new paper, Portfolio Manager Mike Hugman offers this suggestion: abandon your preconceptions. That’s because the next cycle is likely to differ from any that have gone before.

We believe that after a long period of rebalancing, valuations of EM assets look attractive

Past performance is not a reliable indicator of future results, losses may be made.

Source: Investec AM, JP Morgan, 31 Dec 2018. Chart shows local debt (JP Morgan GBI-EM Global Diversified index; rolling 3-year returns, annualised).
For further information on indices, please see Important information section.

The paper takes a deep dive into the previous two economic cycles in emerging markets and considers what lessons they hold for investors:

  • Stellar cycle (2003 to 2012): emerging markets produced very impressive returns, with local and hard currency debt returning about 12% and 11% p.a., respectively. But don’t expect repeat performance. For one thing, China’s modernisation programme, which drove a commodity supercycle, was a once-in-a-generation event. For another, EM assets were unusually cheap back in 2003.
  • Lacklustre cycle (2013 to 2018): local debt declined by 2.3% p.a., and hard currency debt returned a disappointing 3.1% p.a. But investors shouldn’t let this weak performance cloud their judgment, the paper argues. One reason this cycle’s returns look so meagre is that valuations were stretched at the start. Another key reason for optimism is that the ‘lacklustre cycle’ saw both the public and private sectors in emerging markets undergo long and painful structural transformations. These have left the developing world stronger, more resilient to outside shocks, and with the potential to deliver solid investment returns, particularly on a relative basis.

We believe that after a long period of rebalancing, valuations of emerging market assets look attractive. For investors with an understanding of the risks, an appropriate time horizon and realistic expectations, we regard this as an attractive entry point and a good time to reassess existing allocations.

As it says on nearly every investment publication, ‘past performance is no guide to the future’. Investors whose views on emerging markets are anchored in either of the last two cycles would do well to pay particular attention to those words as a new economic regime approaches.

Download the Publication

The value of investments, and any income generated from them, can fall as well as rise.
Emerging market (inc. China): 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.


Important information:

This material 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 results may differ materially from those stated herein.
All rights reserved. Issued by Investec Asset Management, issued February 2019.

Indices are shown for illustrative purposes only, are unmanaged and do not take into account market conditions or the costs associated with investing. Further, the manager’s strategy may deploy investment techniques and instruments not used to generate Index performance. For this reason, the performance of the manager and the Indices are not directly comparable.

Mike Hugman
Mike Hugman Portfolio Manager
Peter Eerdmans
Peter Eerdmans Head of Fixed Income and Co-Head of EM Sovereign & FX

The content of this page is intended for investment professionals only and should not be relied upon by anyone else

Please confirm you fall under this category

By entering you agree to our Terms & Conditions

Some of the funds displayed on this page may not be registered in your region and will therefore not be available for sale . Please visit to check registration by country.