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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. We use cookies to ensure that we give you the best experience on our website. This includes cookies from third parties. Such third party cookies may track your use of our website. By continuing you are confirming that you are happy to receive all cookies on our website. Please refer to our Cookie Policy for further information, including steps to take to disable cookies.

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Emerging Perspectives

A fresh take on local EMD

6 November 2019
Authors: André RouxPortfolio Manager, Antoon de KlerkPortfolio Manager, Peter EerdmansHead of Fixed Income and Co-Head of EM Sovereign & FX, Werner Gey van PittiusCo-Head of Emerging Market Sovereign & FX

The quick view

  • Total return investment approaches can mean a variety of things. For us it’s about catering to investors who want all the return of the local currency debt market but less of the risk.
  • Using the freedom a total approach gives us, we explore the entire investment universe, favouring lower volatility markets and economies with improving long-term structural dynamics.
  • Launched almost six years ago, the strategy has delivered upside capture with less volatility than the market, while also posting top-decile performance.*

We are firm believers in the long-term return and diversification potential of emerging market (EM) local currency debt and the important role the asset class can play in investors’ overall portfolios. And we believe that an active approach is the best way to access this diverse universe, as we discussed in our paper Active versus Passive in EMD: the alpha opportunity.

We also recognise that the shortcomings of the main benchmarks in EM local currency debt – including concentration risk, excessive volatility and narrow inclusion criteria – create opportunities for managers willing to think beyond these limitations and take advantage of the opportunities the investment universe has to offer.

Now approaching its sixth birthday, our total return strategy provides a solution for investors wishing to access the EM local currency debt opportunity. It is particularly relevant for those who:

  • Believe that an unconstrained approach to investing, combined with the inefficiencies of benchmark construction, can provide opportunities in the pursuit of superior returns.
  • Are sensitive to drawdowns, preferring to target higher alpha in down markets and understanding this may mean forgoing some potential upside capture when markets rise sharply.

In our paper we reflect back on nearly six years of investing successfully with a total return approach.

Download PDF

 

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.

*eVestment Global Emerging Mkts Fixed Income - Local Currency universe, January 2014 to September 2019: Investec Emerging Market Local Currency Total Return Debt: 6th percentile. Please see paper for full details.

André Roux
André Roux Portfolio Manager
Antoon de Klerk
Antoon de Klerk Portfolio Manager
Peter Eerdmans
Peter Eerdmans Head of Fixed Income and Co-Head of EM Sovereign & FX
Werner Gey van Pittius
Werner Gey van Pittius Co-Head of Emerging Market Sovereign & FX

Additional 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 November 2019.

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

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