Having identified those countries, currencies and instruments that they expect to outperform or underperform, the team then make decisions regarding over or underweight positions in the portfolio.
Opportunities can come from hard currency sovereigns, quasi-sovereigns, corporates, local currency sovereigns or currencies.
When it comes to specific countries, they currently cite Brazil as a positive example. The country used to have a huge current account deficit but has reduced this sharply since 2013.
Growth is picking up, inflation is still below target and Brazilian real rates are the highest among mainstream emerging markets. That leaves it well placed to weather the current squall.
They also believe the situation is similar in Indonesia and South Africa.
And, despite the recent issues, the team is not negative on Argentina.
The authorities may have eased policy too quickly, but they’ve been swift to correct their mistake and were right to ask the IMF for help.
The team see the recent weakness as a buying opportunity. They have been selectively adding risk to the portfolio, confident that many attractive credits are ripe for reappraisal when the market overcomes its current bout of nerves.
Darius McDermott is managing director at FundCalibre