Kames' Baines: Credit ratings do not reflect risks in EMs

Currency also a big risk

Tom Eckett
clock • 2 min read

Stephen Baines, co-manager of the recently launched Kames Short Dated High Yield Global Bond fund, said one of the reasons he is avoiding emerging market debt (EMD) is credit ratings agencies struggle to capture qualitative risks such as political and legal issues.

Speaking to Investment Week after the launch of the fund, Baines said when companies in emerging markets default, it is not always guaranteed one could get investments back when taking the firm to court. The manager referenced the scandal around Brazilian meatpacker JBS as one such political risk, where President Michel Temer allegedly encouraged chairman Joesley Batista to "bribe a jailed former legislator to buy the lawmaker's silence". JBS, a large issuer of high yield debt, saw yields on its bonds maturing in 2024 rise from 6% to 8.6% over two weeks as the scandal unfolded, accord...

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