Emerging markets debt: more room to run

Robert Reichle, Fund Manager and Emerging Markets specialist, provides a detailed analysis of the asset class Emerging Markets Debt. He explains why in the aftermath of the Corona Crisis and on the back of an economic upswing the asset class can be a valua-ble Investment opportunity in the future.

Positive ending for 2020 as fundamental tailwinds grow

2020 was as one of the most volatile years for emerging market (EM) debt, but in the end displayed the asset class’s resilience once again. High returns in the asset class are not easy to come by – navigating its volatility is the key – and 2020 was the perfect example for it. The asset class suffered the worst quarterly drawdown in almost 20 years in the first quarter, only to be followed by its second-best quarterly return. Despite temporary volatility levels as high as those during the global finan-cial crisis, all segments of the asset class finished the year in positive territory (see Chart 1). EM sovereigns returned 5.3%1, benefiting from significant spread tighten-ing in the fourth quarter, as well as from their longer interest-rate duration profile in an environment of declining US Treasury yields. This also helped EM corporate bonds, which returned 7.1%, outperforming their sovereign counterpart not only on an absolute, but also on a risk-adjusted basis, experiencing lower levels of volatility during the depth of the crisis. Meanwhile, local currency debt gained 2.7%, predom-inantly driven by a strong fourth quarter rally in EM currencies.

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Author

Robert Reichle

Robert Reichle, CFA, CQF joined Berenberg as a senior portfolio manager in January 2010. As a member of the fixed income selection team he is responsible for the creation and implementation of global fixed income portfolio management strategies. He has expertise in emerging markets debt, global government bonds, as well as corporates and financials. He is also the lead manager of the Berenberg mutual funds Emerging Markets Bond Selection, Global Bond Selection, and EUR Government Bond Selection. Robert has been working in the financial sector since 2004. Before joining Berenberg he was a senior strategist and portfolio manager at Payden & Rygel in Los Angeles and he also worked at WestLB AG, London as a manager in Emerging Markets credit derivatives trading and structuring. Robert is a Chartered Financial Analyst (CFA), received the CQF designation, and also has a German Diplom in economics from the University of Ulm and a Master in international economics from the University of Pantheon-Sorbonne, Paris.

Head of Fixed Income Global & Emerging Markets

Suitable investment solutions

Fixed Income

Emerging markets: Active investment in government and corporate bonds from globally important bond markets and the emerging markets in local and hard currencies

Fundname
ISIN | WKN:
Performance
1 year
Volatility
1 year
NAV

Berenberg EM Bonds R D

DE000A1C2XK8 | A1C2XK
Date: 24.05.2022
ISIN: DE000A1C2XK8
WKN: A1C2XK
Performance 1 year: -12.90%
Volatility 1 year: 7.58%
NAV: 76.92 EUR

Berenberg Sustainable EM Bonds R

LU1725429309 | A2H8YS
Date: 24.05.2022
ISIN: LU1725429309
WKN: A2H8YS
Performance 1 year: -11.65%
Volatility 1 year: 3.64%
NAV: 82.55 EUR

Berenberg Global Bonds R D

DE000A1JUU12 | A1JUU1
Date: 24.05.2022
ISIN: DE000A1JUU12
WKN: A1JUU1
Performance 1 year: -1.04%
Volatility 1 year: 5.53%
NAV: 86.69 EUR