When we look at emerging markets from a global perspective, valuations look quite attractive. But emerging markets don't tend to do very well when you have a significant central bank tightening cycle across the globe.
There's also a lot of idiosyncratic uncertainty with emerging markets, tied to US or Western friction with China, Chinese growth questions, uncertainty in Eastern Europe and various elections across Latin America.
The bottom line is that we think emerging markets will be a good diversifier for clients over the course of the next few years, but our exposure remains low.
We have reduced our position over the course of the last year and our focus is almost entirely on the higher quality and more liquid segments of the emerging markets.
We have small emerging markets currency exposures and our bond exposures are almost always in sovereigns and quasi-sovereigns. We're very hesitant to move into emerging market corporates, frontier markets and lower-rated segments in the emerging markets opportunity set.
For more of Ivascyn's views on the outlook for fixed income investing, read our exclusive guide.
