Emerging Markets Debt

Not Just for the Yield-Seekers

Investors tend to seek emerging market (EM) debt when they need to enhance yield within their fixed income allocations. But a dedicated allocation to EM debt can offer investors much more than yield enhancement alone. Today, volatility has brought dispersion back to these markets, creating new opportunities to invest in assets at attractive valuations.

Growth, complexity, and opportunity on the rise

From 2001 to 2022, EM economies’ share of world gross domestic product (GDP) doubled from approximately 20% to 40%. Among the profound changes has been the evolution of EM capital markets. As debt markets have expanded to almost US$28 trillion across four major market segments, so has the accessibility for foreign investors (US$7.3 trillion available).¹

Going forward, EM debt may prove even more attractive as the investable universe has grown and both economies and corporate balance sheets have strengthened.

However, investors need to understand the risks pertaining to individual EM markets in order to be able to capture these opportunities, as economic and political woes have made headlines and stoked volatility.

Emerging Markets Debt Universe - Four Distinct Asset Classes Across More Than 85 Countries

Source: IMF, Bloomberg, Barclays and JPMorgan as of 31 December 2023. Global Bond Indices represented by Bloomberg Barclays Global Aggregate Index. We are not soliciting or recommending any action based on this material. Any opinions, projections, estimates, forecasts and forward-looking statements presented herein are valid only as of the date of this presentation and are subject to change. For illustrative purposes only.

Opportunities abound for active management

The opportunistic environment present in EM today, risks and all, allows skilled active managers to excel.

The opportunity set is much larger and more diverse than many people realize. The Investable universe has almost $28tn issued across more than 85 countries.¹ And while ETFs are gaining prominence in the EM debt space, they still have a long way to go in effectively replicating this asset class.

PineBridge, as an active manager with one of the largest and most experienced teams in EM debt, is uniquely positioned to deliver the type of expected outcomes from a broadly diversified opportunity set. This is especially true in an environment where returns will be challenged and dispersion will likely be much greater overall.

¹Source: IMF, Bloomberg, Barclays, JPMorgan and PineBridge Investments as of 31 Decmeber 2023. Global Bond Indices represented by Bloomberg Barclays Global Aggregate Index. We are not soliciting or recommending any action based on this material. Any opinions, projections, estimates, forecasts and forward-looking statements presented herein are valid only as of the date of this presentation and are subject to change. For illustrative purposes only.