William Blair Commentary: Beta-Bucket Approach Drives Emerging Debt Allocations

Investing in emerging markets debt is about properly assessing risk. We believe our beta-bucket approach improves our ability to generate risk-adjusted returns over time.

Watch the video or read the recap below.

While we believe that overall market conditions remain favorable for emerging markets debt, the pandemic created idiosyncratic risks and diverging prospects across emerging markets countries.

Therefore, it is critical to have a clear understanding of the risks and opportunities they represent.

Leveraging on our rigorous bottom-up sovereign and corporate credit analysis and many years of experience investing in emerging markets debt, we believe we are well prepared to navigate these opportunities and risks, providing the potential to generate alpha for our clients.

We are fundamental emerging markets debt investors. We have a strong focus on risk management and diversification. To manage concentration risk, our country allocations are well diversified.

We seek alpha in all corners of the emerging markets debt universe. We have a focus on high-yielding frontier markets debt, where we think the risk premium tends to be fundamentally mispriced. We also have a structural overlay to select corporate debt.

Investing in emerging markets debt is about properly assessing risk. We have seen risks playing out from geopolitics, ESG, and other country-specific perspectives.

Marco Ruijer, CFA, is a portfolio manager on William Blair’s Emerging Markets Debt team.