From Adviser Guide: Emerging market debt funds
Q: Which investors should consider emerging market debt?
From an asset allocation perspective, emerging market bonds provide important diversification benefits to fixed income and equity portfolios.
Both hard and local currency bonds enjoy relatively low correlations with US and global government bonds, according to Rob Drijkoningen, head of global emerging markets for ING Investment Management.
Emerging market debt hard currency has relatively high correlations with other spread products though, such as developed market corporate bonds- investment grade and high yield.
The correlation of emerging market debt asset classes with equities – both developed and emerging - is also relatively high, Mr Drijkoningen added.
Local bonds and local money markets manifest a relatively low correlation with spread products, he said.
Brett Diment, head of emerging markets on the fixed income team at Aberdeen Asset Management, said in recent years the appeal of emerging market bonds has broadened out from a small group of institutions to a wide range of investors from pension funds through to the man and woman on the street.
He said long-term investor interest in all three emerging market regions - Asia, Latin America and CEEMA - has helped to improve the market and made it a more stable place to be invested.