The team begins with a top-down analysis of the global macro environment, its impact on EM, and the market’s appetite for risk. The output of the analysis is an overall risk target for all of our portfolios relative to their respective benchmarks.

The team’s objective is to analyze countries' ability and willingness to pay and identify countries that exhibit positive rates of change using frameworks that meld economic, political, and social assessments. We also analyze domestic factors, such as growth and inflation, to determine if they are likely to shape the behavior of interest rate and yield curves, and exchange rates in emerging economies.  We then compare our fundamental views with the market’s to identify value opportunities, as well as to use them as a basis for simulations. Interest rate (duration) and currency investment decisions are made independently.

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.

Risk management is integrated throughout the team’s investment process. An independent team also monitors portfolio adherence to guidelines, overall risk levels, and composition.