Emerging market debt (EMD) has been identified as becoming increasingly attractive in the wake of Brexit, not least due to growing fears over the risk of a further break-up of the EU, according to the findings of the latest survey focusing on EMD by NN Investment Partners (NN IP).1
A quarter (25%) of investors believe that the repercussions of Brexit will have a positive effect on the attractiveness of EMD as an asset class, while another 25% highlighted the prospect of a Federal Reserve rate rise as also likely to have an impact.
Marco Ruijer, Lead Portfolio Manager for EMD at NN IP, commented : “EMD continues to gain traction among investors who are attracted by the still attractive yield levels of 5 % in comparison with ultra-low/negative yield levels in Developed Markets. This is evidenced that inflows, in particular the EMD Hard Currency markets, has accelerated after the Brexit Vote.”
In other findings, the survey revealed that investors’ biggest concerns regarding the EMD market are political uncertainty (44%), closely followed by credit quality (42%). However, despite this, more than half (54%) of fund managers reported that they expect institutional investors’ allocations to EMD to increase over the next three years.
1. Findings revealed in NN Investment Partners’ own research carried out in a survey by Citigate Dewe Rogerson amongst 86 international institutional investors in July and August 2016