The EM debt landscape can present both challenges and opportunities for investors. In our whitepaper, we discuss why an unconstrained approach makes sense for the asset class.
In emerging markets, the universe is so diverse that geopolitical events and significant policy decisions are part and parcel of the investment landscape, often driving the volatility and dispersion that can be harnessed to generate returns.
However, this volatility can mean that investors feel cautious about their allocations. Furthermore, with a plethora of unconstrained, total return and absolute return approaches, much debate has occurred around how to deliver returns, whilst navigating volatility through asset allocation.
In our paper, we look at why a high conviction, total return approach produces the best results in the unconstrained emerging markets debt (“EMD”) space, in our view. Our piece includes:
• How a benchmark agnostic strategy can open up a portfolio to a wider opportunity set, offering a potentially value-additive approach.
• The various formats of unconstrained strategies available in the market.
• The ‘four pillars’ of unconstrained strategy implementation.
We also showcase our BlueBay EM Unconstrained strategy, which has delivered compelling, risk-adjusted returns over its 10-year plus track record. The fund’s strong performance relates to its key pillars of design:
1. Flexible allocation to four sub-asset classes,
2. Access to a full toolkit of hedging instruments,
3. A benchmark-agnostic approach which enables a high-conviction portfolio, and
4. Idiosyncratic sources of return.
We believe that combining high conviction with unconstrained implementation can deliver compelling results, when backed by a robust investment process and a skilled team of EMD investors with a nuanced understanding of how to navigate the asset class.