From January through April 2025, the Morningstar Emerging Markets Corporate Bond (10 percent China Capped) index returned negative 6.9 percent as emerging-markets corporate debt faced significant headwinds in March and April amidst Donald Trump’s tariff onslaught. Spreads widened, with the high-yield issuers particularly vulnerable. Furthermore, concerns about a slowdown in global growth, continued to cast a shadow over the investment landscape.
In this light, Loomis Sayles Short Term Emerging Markets Bond and Ninety One GSF Emerging Markets Corporate Debt are interesting analyst-rated strategies in the global emerging markets corporate bonds Morningstar category. Both strategies have earned Morningstar Process Pillar ratings of Average and People pillar ratings of Above Average.
People
At Loomis Sayles, the investment team stands out for its depth and experience. Taking care of this strategy is lead manager Elisabeth Colleran alongside comanagers Eddy Sternberg and David Rolley. Colleran leans on Sternberg for bottom-up security selection with Rolley offering top-down macro insights. The trio boasts an average of more than three decades of experience and their complementary skillsets are a plus. Supported by 13 credit analysts and seven sovereign analysts specializing in emerging markets, as well as two quant analysts, the strategy has a wealth of experienced resources at its disposal.
At Ninety One, lead manager Victoria Harling and co-manager Alan Siow, oversee the strategy. Although this duo is slightly less experienced compared to the leaders at Loomis Sayles, they have navigated numerous credit cycles over their careers. They also benefit from strong supportive resources including 11 emerging-markets credit analysts whose recommendations form the backbone of the bottom-up selection process here.
Following elevated analyst turnover in 2023 and 2024, this is a watchpoint at Loomis Sayles while this has stabilized at Ninety One in recent years following some elevated turnover between 2018 and 2022. Overall, both teams have differentiated themselves from the crowd to support Above Average People pillar ratings.
Process
Although both strategies have earned Process pillar ratings of Average, that is where the similarity ends.
The Loomis Sayles team seeks out companies with consistent cash flows and positive future growth and is benchmark-agnostic. That said, top-down views are not ignored as they will adjust the portfolio’s overall sensitivity to risk factors such as geographical regions or commodity prices. However, their investable universe is roughly 15 percent smaller than the typical peers as the portfolio is limited to emerging-market corporate bonds with maturities of six years or less, credits rated B minus or higher and issue sizes of 200 million dollar or more. These limits make it difficult to compete with others in the category.
In contrast, the Ninety One team follows a value-driven, bottom-up approach which can often lead to concentrated risk positions. A quant-based screening process helps the team identify relative-value opportunities across duration, credit rating, sector and country, narrowing the opportunity set to around 200 issuers. The team then does a deep dive into each issuer’s governance, capital management, cash flow and competitive positioning to identify the most attractive opportunities. But its high conviction approach results in much higher volatility than peers, tempering our conviction.
Portfolio
As the Loomis Sayles team limits the maturity of holdings, the strategy’s duration (usually 2.2 to 2.7 years) is much shorter than the typical 4.5 years of conventional peers. In comparison, the Ninety One strategy has significantly more interest rate sensitivity with duration kept within one year of the widely used JPMorgan CEMBI Broad Diversified Index (the latter stood at 4.43 years as of September 2024).
When it comes to credit quality, Loomis Sayles does not dip into credits rated below B minus, but they actively use the high-yield allocation (usually between 25 percent to 45 percent) to adjust risk based on their risk appetite. In contrast, Ninety One tends to seek out bargains in higher-yielding credits which can lead to higher-than-benchmark credit sensitivity and a bias to below-investment-grade fare (this has hovered at around 60 percent between 2019 and 2024).
When it comes to portfolio holdings, the Ninety One portfolio is more concentrated compared to Loomis Sales with roughly 80 to 110 issuers versus Loomis Sayles’ typical 150 companies.
Performance
Loomis Sayles’ strategy, with its unique characteristics, is an uneasy fit for the emerging-markets corporate bond category. In times of interest rate hiking cycles, its lower interest rate sensitivity will benefit performance like in 2022 when it dramatically outperformed the Morningstar category average when interest rates rose globally. However, when below-investment-grade credits rally, this higher-up in quality strategy will lag its peer group. Overall, it offers investors a smoother ride compared to peers.
At Ninety One, the strategy’s tolerance for concentrated positions results in higher volatility (as measured by standard deviation) compared to its peers and benchmark. This, along with the strategy’s exposure to the Chinese real estate sector, led to underperformance from 2021 through 2023, weighing on longer-term results. But the team’s ability to recover losses during market rallies and their strong credit selection skills, remains evident. For instance, performance rebounded strongly in 2024, driven by strong security selection and a rally in some of the Chinese real estate names that remained in the portfolio.
Elbie Louw, CFA, CIPM, is a Senior Analyst in Manager Research at Morningstar Benelux. Morningstar is a member of the Investment Officer expert panel.