Emerging Market Debt Has Outperformed Most Asset Classes and Continues to Look Attractive, According to Standish Mellon Asset Ma
May 05 2009 - 8:44AM
PR Newswire (US)
Asset Class Should Not Be Overlooked by U.S. Institutional
Investors BOSTON, May 5 /PRNewswire-FirstCall/ -- Emerging market
debt has outperformed by a wide margin U.S. high-yield bonds,
emerging market and U.S. equities, and most other risky asset
classes on a one, three, five, and 10-year basis. Yet, as a result
of a bias toward investing at home as well as an equity-oriented
culture, many institutional investors from the United States still
tend to overlook this asset class, said Alexander Kozhemiakin,
director of emerging market strategies for Standish Mellon Asset
Management Company LLC, the fixed income specialist for BNY Mellon
Asset Management. For example, over the three-year period preceding
the end of the first quarter of 2009, emerging market debt
denominated in U.S. dollars, as measured by the JPMorgan EMBI
Global, returned six percent, while emerging market local currency
denominated bonds, represented by the JPMorgan GBI-EM Global
Diversified, generated a 16 percent return. During the same period,
U.S. high-yield corporate bonds, as measured by the JPMorgan U.S.
High Yield Bond Index, lost 14 percent; emerging market equities,
as measured by MSCI EM, dropped 28 percent; and the Standard &
Poor's 500 representing U.S. equities plunged 38 percent*. The
reasons for the resilience of emerging market debt include improved
credit quality of most sovereign issuers, a generally favorable
balance between supply and demand for sovereign debt and more rapid
growth of emerging market economies compared with the developed
world; and these factors are likely to continue supporting the
asset class going forward, Kozhemiakin said. "Over the past decade
we have seen tangible macro-economic improvements in many emerging
market countries. These improvements are manifesting themselves in
lower sovereign debt ratios, higher foreign exchange reserves, and
more competent fiscal and monetary policies," Kozhemiakin said. "It
is therefore not surprising that emerging market sovereign bonds
and currencies have outperformed emerging market equities, which
are also directly exposed to the company risk. In contrast to the
well-documented macro-economic improvements, evidence of general
progress on company-level issues in the emerging markets, such as
adequate and timely disclosures, managerial motivation and investor
protection, is far less conclusive. However, all emerging market
asset classes are likely to do well once global economic activity
starts picking up again." According to Kozhemiakin, emerging market
debt continues to look attractive and has the potential to produce
equity-like returns with less risk. In addition, it is an asset
class that is replete with market inefficiencies, thus presenting
alpha opportunities to skilled managers. "The importance of
emerging market debt in a well-diversified portfolio should not be
overlooked," he stressed. "Beware of the benchmark drift, however,
as emerging market debt has become a very heterogeneous asset
class. In particular, investors as well as emerging market debt
portfolio managers should explicitly identify their strategies by
separating dollar-denominated debt from debt denominated in local
currency, and sovereign bonds from corporate credits." Notes to
Editors: Standish Mellon Asset Management Company LLC, with $45
billion of discretionary assets under management, provides
investment management services across a broad spectrum of fixed
income asset classes. These include corporate credit
(investment-grade and high-yield), emerging markets debt
(dollar-denominated and local currency), core / core plus and
opportunistic (U.S. and global) strategies. Standish also provides
advisory services on $21 billion of assets in respect of its global
workout solutions business. The firm also includes assets managed
by Standish personnel acting as dual officers of The Dreyfus
Corporation and The Bank of New York Mellon, each a subsidiary of
The Bank of New York Mellon Corporation. Headquartered in Boston,
Standish is one of 17 investment boutiques that comprise the BNY
Mellon Asset Management business. BNY Mellon Asset Management is
the umbrella organization for The Bank of New York Mellon
Corporation's affiliated investment management firms and global
distribution companies. The Bank of New York Mellon Corporation is
a global financial services company focused on helping clients
manage and service their financial assets, operating in 34
countries and serving more than 100 markets. The company is a
leading provider of financial services for institutions,
corporations and high-net-worth individuals, providing superior
asset management and wealth management, asset servicing, issuer
services, clearing services and treasury services through a
worldwide client-focused team. It has $19.5 trillion in assets
under custody and administration, $881 billion in assets under
management, services more than $11 trillion in outstanding debt and
processes global payments averaging $1.8 trillion per day.
Additional information is available at http://www.bnymellon.com/.
*These indexes are trademarks of JPMorgan, Morgan Stanley and
Standard & Poor's. The foregoing indexes/ licensors do not
sponsor, endorse, sell or promote the investment strategies or
products mentioned in this article and they make no representation
regarding the advisability of investing in the products or
strategies described herein. All information source BNY Mellon
Asset Management as at 31 March 2009. The views represented in this
document are those of Standish Mellon Asset Management and do not
necessarily represent the views of the BNY Mellon Asset Management
umbrella organization. This press release is qualified for issuance
in the US and is for information purposes only. It does not
constitute an offer or solicitation of securities or investment
services or an endorsement thereof in any jurisdiction or in any
circumstance in which such offer or solicitation is unlawful or not
authorized. This press release is issued by BNY Mellon Asset
Management to members of the financial press and media and the
information contained herein should not be construed as investment
advice. Past performance is not a guide to future performance. A
Bank of New York Mellon Company(SM) DATASOURCE: The Bank of New
York Mellon Corporation CONTACT: Mike Dunn, +1-212-922-7859, , or
Sarah Deutscher, +44-20-7163-2744, Web Site:
http://www.bnymellon.com/
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