Table of Contents
PGIM Fixed Income's Emerging Markets Total Return Strategy seeks to generate +450 bps of annualized gross excess return over ICE BofAML 3-Month LIBOR over a full market cycle. 1,2 The strategy is designed to capture the best ideas from a broad range of emerging markets hard currency sovereign/quasi sovereign bonds, corporate bonds, local bonds, currencies and volatility.
The Emerging Markets Total Return Strategy is a “go anywhere” strategy designed to capture best ideas from a broad range of emerging markets hard currency sovereign/quasi sovereign bonds, corporate bonds, local bonds, currencies and volatility. The strategy provides the flexibility to express views across emerging markets based on top down and bottom up themes. The approach also provides the freedom to capture alpha from “best ideas” while avoiding less desirable sectors and issuers. The strategy focuses on the 5-7 year maturity range (to decrease volatility), and positions across curves based on identified (relative) value. The strategy also uses well defined risk parameters help to manage downside risk.
PGIM Fixed Income implements an actively-managed, four-step decision-making process to construct and manage Emerging Markets Total Return portfolios:
1. Top Down Risk Allocation:
Assess global appetite for risk to determine portfolio risk profile, leveraging firm's resources.
2. Asset Allocation - Global Rates, FX, & Spread Sector Allocation:
Determine country/term structure, currency, and sector positioning. Ideas from sector specialists are emphasized.
3. Security Selection & Relative Value:
Bottom-up research-based approach. Sector specialists and research analysts aligned by sector/industry.
4. Risk Management:
Employ a rigorous process to tightly monitor risk as all levels. Use proprietary tools to verify performance achieved is appropriate for risk taken.
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 March 31, 2022.