Allocating to emerging market debt: An investment solution for Australian institutional investors

Superannuation funds in Australia continue to face challenges from a low-yield environment and the requirement to deliver strong risk adjusted returns for their members. We believe investing in emerging market debt can form part of the solution.

Compared to developed markets, emerging market debt ("EMD") typically offers higher yields and a favourable long-term risk/return profile. There are also diversification benefits to consider, especially as the asset class spans across a large number of countries and economies, and various sources of return.

Furthermore, emerging market debt offers diversification compared to higher-yielding bonds in developed markets, as these typically have a positive correlation with developed market equities.

This report investigates various approaches that an Australian institutional investor could utilise to gain exposure to the emerging market risk premium within debt markets in three parts:

  • Outlining the objective and preferences for investing in emerging market debt.
  • Introducing the asset class and exploring its characteristics and benefits.
  • Presenting the case for a blended approach to emerging market debt investing.

Emerging market debt strategies

Our range of emerging market debt strategies offers compelling capital growth and income opportunities relative to developed market fixed income.

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