Emerging Markets Fixed Income Opportunities Strategy
Emerging Markets Fixed Income Opportunities Strategy

Emerging Markets Fixed Income Opportunities Strategy

 
 
 
Summary

 

The Emerging Markets Fixed Income Opportunities Strategy seeks to provide access to the full spectrum of Emerging Markets (EM) fixed income. The team seeks to identify the best investment opportunities across hard and local currency instruments, as well as sovereign and corporate issues by utilizing an approach that combines top-down macro assessment with rigorous bottom-up fundamental analysis. 

 

 

4.5-7 years
Typical Duration
5.5-6.5%
Typical Yield to Maturity
0-80%
U.S. Dollar-Denominated Exposure
 
 
Investment Approach
Philosophy

As Emerging Market (EM) economies have changed and developed over the past two decades, so too has the opportunity set available to fixed income investors. Given the impact of global macro themes and idiosyncratic factors on EM fixed income performance, it has never been more important for investors to have the flexibility to invest across the entire fixed income investment universe. An opportunistic approach which provides exposure to both foreign (U.S. dollar) and local currency fixed income assets, whether sovereign or corporate, could provide benefits such as:

· Return potential  

· Lower volatility

· Holistic approach 

 
Differentiators
Global presence

The team is supported by Morgan Stanley’s presence in nearly every major financial market and region, drawing on the scale and scope of the firm’s global franchise to help manage risks and identify opportunities throughout market cycles.

Experience and complementary skill set

The team has been through a variety of volatile markets and is comprised of investment professionals with complementary skills sets, which facilitate informed, well-researched investment decisions. MSIM has managed dedicated EMD assets since 1993, with the Head of the EMD effort being involved since 1997. 

Morgan Stanley Investment Management’s structure

The firm’s structure allows for entrepreneurial flexibility, equipping the investment team with the liberty to respond quickly to market developments and swiftly implement investment ideas.

 
 
 
Investment Process
1
Identify macro-fundamental drivers

First the team conducts a top-down assessment of the global environment to determine how it interacts with economic fundamentals in emerging economies. The analysis of global and financial conditions, and their likely impact on EM fundamentals, helps to determine the overall risk positioning in the portfolio. 

2
Derive thematic investment thesis

Here the team identifies countries that exhibit positive fundamental rates of change using frameworks that meld economic, political and social assessments.

3
Evaluate investment opportunity set

The team evaluates the opportunity set using a number of techniques that include sovereign analysis, currency, interest rate and yield curve analysis and credit analysis.

4
Security selection and portfolio construction

The team’s models provide perspective on market valuations in different time periods, enabling them to identify potential mispricing and alpha opportunities. Each potential security is analyzed through a variety of valuation metrics. The team uses a Positioning & Sizing framework that takes into consideration the total return potential of investment alternatives, the volatility of returns and correlation of such potential positions to assess risk, and a conviction factor about the return/risk trade-off based on a comprehensive review of event risk (including near-term political factors) and the market technicals such as planned issuance, investors’ positioning, and outlook for asset class flows.

5
Diversify and execute

Risk management is integral to investment process. They place emphasis on diversification and the correlations between asset classes and concentrations of countries, themes, regions, sectors, and commodities.

 
 
Portfolio Managers
Managing Director
24 years industry experience
Managing Director
23 years industry experience
Executive Director
14 years industry experience
 
 
Insights
Global Fixed Income Insights
Emerging Markets: Don't Judge a Book by its Aggregates
May 21, 2018
The Emerging Markets Debt Team addresses some of economist Carmen Reinhart's recent statements as well as other popular misconceptions about emerging markets.
Global Fixed Income Bulletin
A Bumpy Ride
Jun 15, 2018
The Global Fixed Income team discusses how May was a schizophrenic month for financial markets, with both bouts of "risk on" and "risk off", and how they expect the high volatility to continue.
Global Fixed Income Bulletin
Ranges Are Meant to be Broken
May 11, 2018
The Global Fixed Income team discusses how we may have seen markets settle in a range in April, but that new economic data (better or worse) could force the market to change its expectations.
 
 
 
 

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