Investor exposure to emerging market local debt is likely to continue to increase, according to Baring Asset Management.
Barings believes this asset class is set to benefit from ongoing structural changes to asset allocations following the global financial crisis, with pension funds in both emerging economies and OECD countries predicted to be particular proponents.
Thanasis Petronikolos, head of emerging market debt and manager of the Baring Emerging Markets Debt Local Currency Fund, said: “Emerging market local debt has produced attractive risk-adjusted returns so far this year and has proved resilient, despite a risk-averse environment due to the concerns surrounding the European sovereign debt crisis and the sustainability of global growth.”
He added: “Capital inflows to emerging markets are strong and rising, and improving fiscal and debt profiles continue to underline the credit quality of most emerging market economies.”
Currency appreciation was cited as a main source of future outperformance, in addition to income and capital gains potential linked to investing in emerging markets.
©2011 funds europe
