- Advertisement -
- Advertisement -

Related

Kames warns of risks from ‘overbought’ EM debt

Latest Report

- Advertisement -

London – Investors need to treat emerging market debt with caution following a strong period of performance in 2016, with the more hawkish tone now emanating from the US Federal Reserve a potential threat, Kames Capital’s Scott Fleming (pictured) has warned.

Emerging market debt has delivered double-digit returns year to date, with the JP Morgan Emerging Market Bond Index Global Diversified returning 14.2%.

Such eye-catching gains – ahead of many types of fixed income, as well as other asset classes – have prompted increased interest from investors, with emerging market debt seeing 11 consecutive weeks of inflows. However, risks are now emerging which threaten returns, according to Kames.

Fleming, manager of the Kames Emerging Market Bond Fund, said this shift in the Federal Reserve’s stance – and recovering US inflation data – are a rising threat to the sector.

“A recent shift to a more hawkish tilt by the Fed, coupled with an upward trajectory for core Personal Consumption Expenditures (PCE) inflation, are early warning signs for emerging markets,” he said. “Both represent rising threats to the sustainable nature of the performance of the higher yielding portion of emerging market bonds in particular, where spreads reflect levels which are currently ‘overbought’.”

As well as a potential threat from shifts in central bank policy, Fleming added there were a number of other risks for the sector.

He noted banks in some emerging markets had issues with an increase in the number of non-performing loans, while there is also a risk that growth expectations may not prove to be all that sustainable.

Subscribe to HedgeBrev, HedgeNordic’s weekly newsletter, and never miss the latest news!

Our newsletter is sent once a week, every Friday.

Latest Articles

From Running Laps to Running Capital: Ex-Taiga Analyst at DNB

After nine years as an analyst at equity long/short hedge fund Taiga Fund, Øystein Kvaerner has joined DNB Asset Management to launch a new...

Nordic Hedge Funds Wrap Up Strong Third Quarter

Nordic hedge funds continued their strong run of performance since May, advancing an additional 1.7 percent on average in September – the industry’s second-best...

DNB’s Stable Alpha Goes DACH

DNB Asset Management has managed its in-house multi-manager, multi-strategy fund platform since early 2020. After a period of muted performance in its early years,...

Opportunities Lie Beneath Aggregate Credit Spreads

Credit spreads across the United States and Europe have tightened to historically low levels, leaving limited reward for simply holding long credit positions. This...

European Alternative Investments Conference 2025

More than 200 practitioners, academics and thought leaders met in Copenhagen for the second European Alternative Investments Conference, hosted by Finansforeningen, CFA Society Denmark...

Playing ‘Moneyball’ for Investors

Having managed the opportunistic hedge fund Pensum Global Opportunities under the Pensum Asset Management umbrella since 2022, Sector co-founder Peter Andersland has now established...

Allocator Interviews

In-Depth: High Yield

Voices

Request for Proposal

- Advertisement -
HedgeNordic
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.