Managers warn on overvalued EMD areas following record inflows

Fixed income managers are warning parts of the emerging market debt universe have become considerably overvalued as a wall of money enters the burgeoning asset class.

As deals for sovereign EMD hit record levels in 2010, up 48% on 2009, managers believe bonds denominated in dollars and euros have become expensive compared to debt issuance in local currencies. The IMA Global Bond sector, home to a number of emerging market debt funds, also recorded strong interest from retail investors in January, with the £277m in net sales a monthly record. EMD funds in the IMA universe tend to be in either local currency or dollar denominated assets. “The wall of money hitting emerging market debt has been phenomenal,” says M&G Emerging Markets Bond fund manager...