Strategies

Emerging Market Debt

Philosophy

BlackRock's Emerging Market Debt (EMD) platform is designed to address the changing landscape of today’s EMD markets with a focus on alpha generation. The team believes that an EMD allocation may deliver investors enhanced income and diversification from fixed income investments in the developed world.

Capital at risk. All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.

The EMD team manages more than $27 billion in EMD strategies across hard currency (USD-denominated), local currency and blended strategies (as of 31/01/2018). The team’s forward-looking, thematic investment process uses scenario analysis to guide asset allocation based on market drivers that impact EMD. The group manages flexible portfolios with the ability to nimbly shift from offense to defense, combining deep local intelligence with a broad global perspective.

The team is guided by the following precepts:

  • Think forward: Drivers of EMD vary in nature, magnitude, direction and duration. In a world with low visibility and shorter cycles, we must think forward and consider multiple scenarios to add value.
  • Focus on market intelligence: An inquisitive approach enables us to generate investment themes and seek strong returns. We support our analysis with our own proprietary fundamental research, quantitative tools and a large on-the-ground network of local contacts.
  • Specialization and ownership: This is crucial for managing emerging markets across all alpha strategies and regions. Portfolio managers should be accountable for the performance of a specific alpha strategy.

The investment process includes several steps:

  • Deep dives on regions and main EM countries led by regional portfolio managers in weekly meetings
  • Analysis of economic indicators, vulnerabilities, flows, trends and central bank activity
  • Analysis of price action (yield curves, FX and spreads)
  • Use of long-standing local network of institutional contacts, which allows immediate, direct access to on-the-ground information
  • Dedicated RQA analysts work with EMD team to analyze risk and help ensure all risks are deliberate, diversified and scaled.

The EMD strategy may appeal to investors who have the following objectives:

  • Seek higher yields during a period of low global rates
  • Enhance diversification of rates and credit exposures
  • Pursue an active, flexible approach to EMD exposures that manages currencies and duration, and seeks to maximize alpha.