Emerging Markets Sovereigns 2023 Capturing Alpha Through Differentiation

Emerging Markets Sovereigns 2023 Capturing Alpha Through Differentiation

Download PDF
Thomas Smith Todd Howard Scott Moses Dominic Guillossou Sara Strauch
JUL 21, 2023

We Recommend

Q1 2023 Emerging Markets Market Review and Outlook

Emerging Market Debt:
Where We Started,
Where We Are, and
Where We’re Going

Explore Strategies

Private Capital

Investing in Emerging Market (EM) sovereign bonds has been mainstream for nearly 25 years, with the benchmark of choice among investors being the JP Morgan Emerging Market Bond Index (EMBI). Over that same period, the entire EM investable universe has grown in breadth and depth to become one of the most intricate in the entire fixed income space. Its intricacy originates from a wide range of risk factors across geography, quality, and duration that can offer interesting alpha opportunities to investors when understood and properly differentiated.

The content below is separated into two segments that we believe will be useful for both the experienced EMBI investor as well as the novice. In the first section we will dive into the current investment environment for EM fixed income and specifically focus on areas we believe alpha can be captured through differentiation. In the second section we discuss the EMBI Global index in a historical context to demonstrate how the index has evolved over the past decade and what are the critical risk factors and opportunities to be aware of today.