Challenges and Solutions to the Cost of Investing in Emerging Markets Local Debt

PGIM Fixed Income

September 2019

Mariusz Banasiak, CFA, Head of Local Currency Bonds and FX; Pradeep Kumar, PhD, CFA, Local Rates and FX Portfolio Manager; and David DiChiacchio, Local Rates and FX Portfolio Manager

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 client portfolio returns.