The Shifting Dynamics in Emerging Markets Local Currency Investing
In this paper, PGIM Fixed Income examine how dynamics in the Emerging Markets Local Currency sector have recently shifted in a more constructive direction.
Mariusz Banasiak, CFA, is a Managing Director and Head of Local Currency Rates and FX for PGIM Fixed Income's Emerging Markets Debt Team. Mr. Banasiak is also a senior portfolio manager for the Emerging Markets hedge fund product as well as being responsible for developing currency strategy for Global and Core plus mandates. Prior to assuming this position in PGIM Fixed Income's Emerging Markets Debt Team, he was responsible for developing portfolio strategies on USD sovereign and local emerging market yield curves and currencies in the Europe, Middle East, and Africa (EMEA) region. Previously, Mr. Banasiak was an Analyst for emerging market debt portfolios in the Portfolio Analyst Group of PGIM Fixed Income. Earlier, he was responsible for risk analysis and performance attribution for the Firm’s proprietary portfolios. Mr. Banasiak joined the Firm in 2004. He received a BS with Honors in Finance from Rutgers University and holds the Chartered Financial Analyst (CFA) designation.
In an environment of expanding negative rate securities across developed markets, emerging markets local bonds (EMLBs) continue to present attractive investment opportunities. Yet, unless active measures are taken, investing in EMLBs can incur extra transaction costs that reduce alpha generation. In this paper, PGIM Fixed Income explains the transaction costs associated with EMLBs and discusses possible solutions to help mitigate, and in some cases, eliminate these costs in order to maximize the returns of client portfolios.
Mariusz Banasiak, CFA, Principal and Head of Foreign Exchange Team, and Tim Whyman, Principal and Portfolio Manager, Emerging Markets Team outline the dynamics that led to the underperformance of EM assets from mid-2011 through early 2016, why the asset class is now on solid footing following several years of headwinds, and the attractive relative value opportunities that exist within EM local debt and FX.
All information as of December 31, 2020. For purposes of the biographies, the “Firm” is defined as Prudential Financial, Inc. ("PFI"). All PGIM and Prudential named entities are subsidiaries or affiliates of PFI. PFI of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom.