Emerging markets debt is a vast, global sector consisting of several different asset types across dozens of countries, each with its own governance structure, fiscal policy, monetary policy, and sovereign yield curve. While this diversity provides a compelling opportunity set and value proposition, it can also create confusion for investors considering the optimal allocation to EM debt.

The dynamic between opportunity and confusion is a critical one to address in The Next Chapter for Emerging Market Debt. This installment of our series takes a sequential approach to providing our perspective on achieving optimal EMD exposure. We start by unpacking the performance attributes of the individual asset classes and then demonstrate the rationale for shifting allocations between these asset classes based on their respective characteristics.

With the attributes and rationale in hand, assessing the performance of individual asset classes and blended allocations through specific market cycles—while also identifying a “benchmark” period for forward-looking context—provides additional context for strategies aimed at delivering optimal risk-adjusted performance.