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Emerging Markets Long/ShortEmergingMarketsLong/Short

Table of Contents
Investment Objective
Investment Philosophy
Investment Process

Investment Objective

PGIM Fixed Income's Emerging Markets Debt Long/Short Strategy seeks to maximize its total return in excess of the ICE BofAU.S. 3-Month Treasury Bill Index (i.e., the alpha) on a risk-adjusted basis over a full market cycle by investing primarily in opportunities in the emerging markets sector of the global capital markets, with a primary emphasis on the fixed income and currency markets.1,2 The Strategy may also invest in derivatives for investment or hedging purposes, which may include credit default swaps, index products, currency forwards, options, and futures contracts.

Investment Philosophy

The Emerging Markets Debt Long/Short Strategy centers on relative value and directionally driven trades including sovereign and corporate long/short positioning, credit curve positioning, and local currency versus hard currency exposures with dynamic hedging of systemic risk. The intention of the Strategy is to capture alpha without relying on the “beta” return that is reflective of the economic environment.

The Strategy seeks alpha through five primary trading strategies:

  • Country and Macro - Long/short positions based on fundamental views and value between countries and macro top down views
  • Pairs Relative Value - Long/short positions in “pairs” of similar securities within a country when their spreads diverge, typically due to market technicals
  • Quantitative FX & Rates - Long/short positions based on country relative value in FX and duration driven by quantitative variables
  • Volatility - Delta-neutral positioning in currency and credit derivatives to capture volatility risk premia and skews
  • Opportunistic Carry - Long positions in high conviction, shorter-maturity, high-yielding issuers

Investment Process

PGIM Fixed Income follows a disciplined, four-step approach to manage the Emerging Markets Long/Short Strategy:

1. Global Backdrop & Portfolio Strategy:
Senior portfolio manager assesses global risk appetite to determine portfolio risk profile and refine portfolio positioning, leveraging firm's resources

2. Country Analysis:
Regional economists evaluate each country from quantitative and qualitative perspective and assign internal ratings

3. Security Selection:
EM corporate portfolio managers/analysts seek to determine best risk/reward opportunities across all regions. Use proprietary tools to highlight relative value opportunities within markets.

4. Risk Monitoring:
Senior portfolio manager/risk manager employ a rigorous process to tightly monitor risk at all levels. Use proprietary tools to verify performance achieved is appropriate for risk taken.

Senior Portfolio Managers

  • Cathy Hepworth, CFA
    Cathy Hepworth, CFA

    Head of Emerging Markets Debt

  • Mariusz Banasiak, CFA
    Mariusz Banasiak, CFA

    Head of Local Currency Rates and FX

1 There is no guarantee that these objectives will be met.

2 On average, over a full market cycle defined as three to five years.

No risk management technique can guarantee the mitigation of elimination of risk in any market environment.

Source: PGIM Fixed Income as of December 31, 2020.

Thank you for your interest in PGIM Fixed Income.

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Prudential Financial, Inc. and its related entities.

For Professional Investors only. All investments involve risk, including the possible loss of capital.

In the United Kingdom, information is issued by PGIM Limited with registered office: Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR. PGIM Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number 193418). In the European Economic Area (“EEA”), information is issued by PGIM Netherlands B.V., an entity authorised by the Autoriteit Financiële Markten (“AFM”) in the Netherlands and operating on the basis of a European passport. In certain EEA countries, information is, where permitted, presented by PGIM Limited in reliance of provisions, exemptions or licenses available to PGIM Limited under temporary permission arrangements following the exit of the United Kingdom from the European Union. These materials are issued by PGIM Limited and/or PGIM Netherlands B.V. to persons who are professional clients as defined  under the rules of the FCA and/or to persons who are professional clients as defined in the relevant local implementation of Directive 2014/65/EU (MiFID II). In certain countries in Asia-Pacific, information is presented by PGIM (Singapore) Pte. Ltd., a Singapore investment manager registered with and licensed by the Monetary Authority of Singapore. In Japan, information is presented by PGIM Japan Co. Ltd., registered investment adviser with the Japanese Financial Services Agency. In South Korea, information is presented by PGIM, Inc., which is licensed to provide discretionary investment management services directly to South Korean investors. In Hong Kong, information is provided by PGIM (Hong Kong) Limited, a regulated entity with the Securities & Futures Commission in Hong Kong to professional investors as defined in Section 1 of Part 1 of Schedule 1 (paragraph (a) to (i) of the Securities and Futures Ordinance (Cap.571). In Australia, this information is presented by PGIM (Australia) Pty Ltd (“PGIM Australia”) for the general information of its “wholesale” customers (as defined in the Corporations Act 2001). PGIM Australia is a representative of PGIM Limited, which is exempt from the requirement to hold an Australian Financial Services License under the Australian Corporations Act 2001 in respect of financial services. PGIM Limited is exempt by virtue of its regulation by the FCA (Reg: 193418) under the laws of the United Kingdom and the application of ASIC Class Order 03/1099. The laws of the United Kingdom differ from Australian laws. In South Africa, PGIM, Inc. is an authorised financial services provider – FSP number 49012.  In Canada, pursuant to the international adviser registration exemption in National Instrument 31-103, PGIM, Inc. is informing you of that: (1) PGIM, Inc. is not registered in Canada and is advising you in reliance upon an exemption from the adviser registration requirement under National Instrument 31-103; (2) PGIM, Inc.’s jurisdiction of residence is New Jersey, U.S.A.; (3) there may be difficulty enforcing legal rights against PGIM, Inc. because it is resident outside of Canada and all or substantially all of its assets may be situated outside of Canada; and (4) the name and address of the agent for service of process of PGIM, Inc. in the applicable Provinces of Canada are as follows: in Québec: Borden Ladner Gervais LLP, 1000 de La Gauchetière Street West, Suite 900 Montréal, QC H3B 5H4; in British Columbia: Borden Ladner Gervais LLP, 1200 Waterfront Centre, 200 Burrard Street, Vancouver, BC V7X 1T2; in Ontario: Borden Ladner Gervais LLP, 22 Adelaide Street West, Suite 3400, Toronto, ON M5H 4E3; in Nova Scotia: Cox & Palmer, Q.C., 1100 Purdy’s Wharf Tower One, 1959 Upper Water Street, P.O. Box 2380 - Stn Central RPO, Halifax, NS B3J 3E5; in Alberta: Borden Ladner Gervais LLP, 530 Third Avenue S.W., Calgary, AB T2P R3.

Any discussion of risk management is intended to describe PGIM Fixed Income’s efforts to monitor and manage risk but does not imply low risk. All investing involves risk, including the risk of loss. Fixed Income securities are subject to certain risks, including credit, interest rate, issuer, market and inflation risk. Foreign and emerging market securities are subject to currency, political, economic and market risks, which may be enhanced in emerging market countries. High Yield securities are lower rated securities that may have a higher degree of credit and liquidity risk. Mortgage and asset-backed securities are sensitive to early prepayment risk, a higher risk of default and may be hard to value and difficult to sell. U.S. government securities may not be backed by the full faith and credit of the U.S.; thus, these issuers may not be able to meet their future payment obligations. With sovereign debt securities, the issuer or governmental authority that controls the repayment of the debt may not be willing or able to repay the principal and/or pay the interest when it becomes due, in accordance with the terms of such obligations. Collateralized mortgage obligations may have unpredictable cash flows that can increase the risk of loss. Public bank loans are subject to liquidity risks of lower rated securities. The use of derivative instruments may disproportionately increase losses and have a significant impact on performance. They also may be subject to counterparty, liquidity, valuation, correlation and market risks.

There is no guarantee that any investment strategy will achieve its objective under all market conditions or be suitable for all investors. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.

The views and opinions expressed herein are those of PGIM Fixed Income and are subject to change without notice.

Prudential Financial, Inc. 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. PGIM, the PGIM logo and Rock design are service marks of PFI and its related entities, registered in many jurisdictions worldwide.
 
The information on this website is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. In making the information available on this website, PGIM, Inc. and its affiliates are not acting as your fiduciary.
 
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