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Emerging markets debt
A strategic allocation for portfolios
Emerging market debt (EMD) offers plentiful benefits to investors, from yield enhancement, diversification and attractive returns.
What is emerging market debt?
EMD consists of the bonds issued by government and companies of developing countries in both hard and local currencies. The EMD market is the world's largest credit market, approximately USD$29 trillion in size (as of 31 October 2024 according to the Institute for International Finance).
The benefits of emerging market debt?
- Higher yields vs. developed markets, despite lower debt-to-GDP ratios, lower default and higher recovery rates on average
- Diversification: EMD typically exhibits low correlation with US corporate debt; emerging markets comprise of a wider array of economies, so they can also be uncorrelated to each other
- Enhanced return potential: emerging markets inherent sensitivity to sentiment and shocks combined with a rich issuer base enables active managers to generate enhanced returns by exploiting market overreactions.
Why allocate to emerging market debt now?
EMD remains underrepresented in investor portfolios, despite their benefits. Often misconceptions of the asset class have been the hurdle for investors. In reality, with lower debt vs. their developed markets counterparts, strong liquidity and growth tailwinds, we believe EMD should be a part of any core fixed income holding.
How to access emerging market debt?
We believe active management excels in generating consistent and superior risk-adjusted returns within EMD. Due to emerging markets' diversity and lower analyst coverage, dispersions and inefficiencies exist, creating a rich environment for skilled active managers to benefit from.
Investors can access EMD in a number of ways, from benchmark-relative to unconstrained strategies, those focused on hard or local currency, government or corporate bonds, or blends thereof.
Fund in focus
BlueBay Emerging Market Unconstrained Bond Fund
A fully flexible strategy that invests in our best ideas across the EMD landscape. It's designed to deliver attractive returns across the market cycle with a focus on downside protection.
Emerging markets explained
Dispelling myths concerning emerging market debt
We dispel 3 EMD myths masking it’s the world's largest credit market, maintains investment grade ratings and exhibits stronger fundamentals than DM.
What is emerging market debt?
The world's largest credit pool is often misunderstood. Get clarity on emerging market debt and learn practical considerations for your portfolio.
Why invest in emerging market debt?
We outline how EMD provides diversification, a potential yield advantage to developed markets and a fertile hunting ground for active managers.
Ways to access emerging market debt
We introduce a framework to help investors consider the most suitable way to access emerging market debt.
Meet the emerging markets team
Jana Harvey
Managing Director & BlueBay Senior Portfolio Manager, Emerging Markets
Get in touch
Find contact names, phone numbers and email addresses for RBC BlueBay's regional sales teams and client directors.