Why global investors will start upping exposure to EMD assets

Experiencing dealing with macro shocks an advantage

Emerging markets account for about 60% of the world economy and 75% of global growth – almost double their share two decades ago.

They also account for more than $2trn - or about a quarter - of the global fixed income market. Yet, despite the size and growing importance of EM, global portfolios have not reflected these structural changes, and investors are still largely underweight EM local bonds. We think the shifting macroeconomic backdrop might contribute to a global rebalancing of investments that will favour allocations to EM. Actively managed EM strategies, in particular, could become increasingly attractive in this very low global rate environment. The macroeconomic environment for emerging markets has ch...