Access fast growing and diverse economies
Emerging or developing markets have more opportunity to grow their economies (coming from a lower base). There is potential for more upside for investors relative to developed markets. These countries – and their investment universes – continue to grow and evolve and this creates opportunities for excess returns and diversification.
Investing in emerging markets debt offers the potential for attractive returns above alternate credit asset classes, especially in the prevailing low interest rate environment.
Why invest with us?
Diversified exposure to emerging markets: our strategy is to invest in sovereign, quasi sovereign and corporate bonds. Our investment process gives us flexibility to choose where opportunities are available in the market to generate returns for our clients.
Tailored portfolios: designed specifically for our clients, all of whom have different needs. We build collaborative relationship with our clients in order to achieve their investment objectives.
A proven track record: over the last decade, we have successfully navigated market cycles and idiosyncratic country turning points. Not only this, our active investment style and focus on risk management means we’ve been able to offer protection on the downside.
ESG integration: Specific country and corporate ESG considerations are an essential part of our in-house research .
Why we are watching mispricing in Turkey
Turkey’s economic recovery was materially impacted by the pandemic. Once the fight against the COVID-19 pandemic gained some ground, Turkey started to ease the restrictions imposed since mid-March. Data released by the Ministry of Health towards the end of June was encouraging, with the number of new cases and daily casualties having peaked and with recoveries on an upward trend. Success against the pandemic and early start of the normalization process proved to be positive as the budget deficit slowed.
Caution remains and fairly so, given the risk of a second wave of cases following the easing of restrictions. Any economic recovery will likely have been hampered by the weakness of external demand until Turkey’s export markets, in particular Europe, recovered. The future of tourism – a key industry for both the official and grey economy – depends on the global success against the pandemic and the easing in global travel.
We have taken advantage of opportunities in Turkey during periods of mispricing. The country’s bonds have been volatile and investment discipline has been necessary. Market technicals, valuations, a belief in the strength of Turkey’s institutions and geo-politics have been drivers for our recent positioning.
Meanwhile, credit fundamentals require a strong focus. Access to USD liquidity and net foreign assets of the central bank are key considerations. A sharp reversal in Turkey’s current account positon from a weaker currency is normally the path to growth for the country. However, the pandemic’s hit to global growth and fiscal shocks for Turkey mean we remain cautious until the budget deficit is controlled and the Turkish currency stabilises without on-going reduction of USD reserves.
How we invest in Emerging Markets Debt
Team
Mark Bodon
Bilal Khan
Insights
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