Managers of emerging market bond funds can expect a “dramatic rise” in flows over the next year as investors turn favourable on the outlook for these assets.
Research among 108 professional investors found that more than seven out of ten respondents expected institutional investor allocations to emerging market debt to rise over the next 12 months – including 10% who expected a dramatic rise.
The NN Investment Partners (NN IP) survey found that three quarters of respondents expected fundamental economic drivers for emerging market bonds to improve within three years, including nearly a fifth who expected a significant improvement.
The reason cited for the improvement in sentiment by 62% of respondents was the support provided by emerging markets’ fundamentals while half cited the credit quality of issuers specifically.
Marcelo Assalin, head of emerging market debt at NN IP, said that emerging markets’ economic growth had outstripped that of developed markets since 2000 and these countries were benefiting from recovering commodity prices and historically low inflation.
He added: “[Emerging market debt] now offers a broad spectrum of sub-asset classes that constitute one of the most exciting investment universes in the world. But market inefficiencies mean there are fantastic opportunities for experienced, active managers to deliver the most attractive returns.”
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