With most global fixed income markets priced for perfection, investors are flocking to the one yield hold-out left: emerging market debt. But are investors really being compensated for the risk?
The nine-year bull market is going into extra time now, thinks Robeco. A real possibility is that the match will end in a sudden death, by a major world leader’s own goal. And that’s someone who’s fonder of football than Donald Trump.
Axa Investment Managers has launched a China short duration bond fund, which aims to give investors exposure to the 56trn (€7trn)renminbi bond market.
An impasse over raising the debt ceiling could see the US hit the financial buffers in early October failing to meet around 23% of its short term obligations, an analysis by Washington think tank the Bipartisan Policy Centre has said.
Fund selectors are losing enthusiasm for absolute return funds. Appetite for long/short equity and bond funds as well as multi-strategy funds has fallen to its lowest point for at least two years.
Investors are stepping up their allocation to high-yield bonds and emerging market debt. The pair were the two best-selling asset classes in January, according to Morningstar fund flows data.
Record-low borrowing costs are continuing to fuel a debt build-up in both developed and emerging markets. Global debt has now reached 327% of GDP, according to the International Institute of Finance (IIF), with EM non-financial corporate debt increasing at the fastest rate.
The amount of global sovereign fixed income with negative interest rates is up 5% since the end of April, according to Fitch Ratings.
Anybody who says that China doesn’t have a credit problem is lying because when that much credit is pumped into the system there is no way that every single loan is a sound investment, according to Schroders’ head of Asian equities Singapore, Lee King Fuei.
The historic way of dividing the world into developed and emerging markets is no longer an adequate way of assessing risk. Our unique approach to country selection helps us avoid the pitfalls of an antiquated approach