Vontobel's van Overfelt on the fundamentals driving EMD markets

'Ripe field' for active managers

As the end of the year approaches and on the back of strong returns, some emerging market (EM) bond investors are considering taking profit and reallocating capital from this asset class. But in the current yield-starved environment, such a move could prove detrimental.

Supported by strong fundamental drivers, EMs are one of the few areas that continue to provide solid yields.  If we look at bond index returns, both the sovereign and the corporate index have yields in excess of 5% (average ratings BB+ and BBB- respectively). For these types of ratings, it is currently very difficult to find better yields (in USD). What are the risks to emerging market debt? EM corporate debt in particular presents many opportunities. The investment universe is broad, diversified and under-researched, consisting of more than 80 countries and a growth forecast fr...