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Talking factsheet: Emerging market debt strategy
Alejandro Arevalo and Reza Karim give an overview of Jupiter’s emerging market debt strategy, how the investment process works, and how the team seek to generate alpha.
Emerging market debt (EMD) continues to be one of the fastest-growing fixed income sectors, having expanded into a widely diversified US$23 trillion universe, as governments and companies in some of the world’s most dynamic economies have tapped into global markets.
Jupiter’s EMD investment team firmly believe that EMD deserves a permanent place in investors’ portfolios. The asset class offers diversification through the cycle; a high yield relative to the rest of fixed income, where around 90% of the universe yields less than 3%; and volatility about half that of the S&P 500 Index1. Nevertheless, while the asset class’s opportunities are evident, it’s still significantly underrepresented in global portfolios and indices.
When investing in such a diverse asset class, the team believe that being selective, active and risk-aware is crucial. They understand the unique opportunities and challenges that each part of the investment universe represents, helping investors to navigate this complex landscape.
The investment team’s flexible mandate means they can invest across the global emerging markets fixed income universe in sovereign and corporate bonds, denominated in both hard and local currencies.
Jupiter EMD Platform – Expertise across markets
The team seek to identify investments that attractively compensate for global and EM country-specific risks and corporate credit risk, using a combination of top-down and bottom-up fundamental research techniques and proprietary valuation tools. In other words, they conduct ‘deep dive’ research to answer the question: “Are we getting paid for the risk we take?”
The team’s investment process also incorporates a variety of risk mitigation strategies to manage drawdowns and to construct an ‘all seasons’ portfolio.
1 Source: Bloomberg, to 30.09.2021. Hard currency EMD.