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Emerging Markets Fixed Income

Strategies
The Emerging Markets Fixed Income team has been investing in the asset class since 1994. The team successfully provided a broad spectrum of customized strategies constructed from the Investment Grade to Below-Investment Grade offerings of the asset class. The EM investable universe includes Sovereign bonds, Corporate bonds, Local Currency bonds, Distressed debt, Convertible bonds, and Structured Finance. The team's bottom-up research process emphasizes global and multi-sector diversification to generate attractive risk-adjusted returns from income and capital appreciation.

Philosophy
The Emerging Markets Fixed Income team shares an investment philosophy that is anchored by four key principles:

  • Emerging Market debt is a secular improving credit story
  • Diversification across regions, countries, and sectors, as well as issuers is fundamental to credit risk management
  • Avoiding potential problem credits and minimizing credit losses are as critical as selecting stable or improving credits
  • Total returns will be derived from current income and capital gains

Process
The team's investment process has been tested through numerous market crises. The team uses a five-step, bottom-up investment process designed to identify attractive investments through initial screening, credit research, establishing a link between credit fundamentals and market valuations , portfolio construction, in addition to an active management style. All sovereign and corporate credits are evaluated on a parallel track to identify credit strengths and weaknesses. The team performs scenario analysis for base-, best- and worst-case outcomes that form the basis of the performance benchmarks established for these credits. The team assigns probabilities and market valuations to derive targeted returns; the building blocks of its portfolio construction. Portfolio overlays, an active management style and a strong buy/sell discipline, complete the Team's process.

Process

Initial Screen

  • Secular Outlook
  • Geopolitical Stability
  • Strategic Sectors and Country Resources
  • Credit Fundamentals

Credit Research

  • In-Depth Analysis
  • Visits/Calls with Government Officials and Management
  • Regulator Filings
  • Company records
  • Identifying Credit Strengths and Weaknesses
  • Debt Indicators
  • Operating performance
  • Competitiveness and market share evaluation
  • Standardized Reports with Performance Benchmarks

Established Link Fundamentals and Valuations

  • Determine Target Returns
  • Develop performance benchmark scenario analysis (Best, Worst & Base Case) performance and assign probabilities and valuation

Portfolio Construction

  • Portfolio Construction Based on Characteristics and Liquidity constraints

Active Management Style

  • Buy & Sell Discipline
  • Buy Discipline criteria includes change In risk-adjusted return, credit quality Improvement and anticipating positive credit event
  • Sell Discipline criteria includes expectation of deteriorating credit metrics, full valuation or change in risk-adjusted return