Winners from EMD shift focus to safer havens

Emerging market debt exposure drives long-term returns for funds in IMA Global Bond sector, while government debt is short-term winner.

It has been a game of two halves for the global bond sector. Over the long term, the weight of exposure to local currency emerging market debt has largely determined the top performers, but in the short term, it is those managers in the ‘safe haven’ assets of gilts, T-bills and bunds that have led the sector. Managers now face a dilemma – emerging market debt has seen significant inflows and looks like a crowded trade, while developed market debt is on historically low yields and it is difficult to see any significant price hikes from here. As a result, global bond managers are increasi...