HEAD-TO-HEAD: Neuberger Berman vs Pictet

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Pictured above: Niels Faassen, Morningstar

Global emerging market debt, a mix of both corporate and sovereign bonds, has become more popular compared to pure local currency bonds and emerging market corporate debt, according to Niels Faassen, Amsterdam-based senior analyst for manager research at Morningstar.

“Only flexible bonds have higher inflows, which are more of absolute return-driven strategies,” he said.

Year-to-date, Ucits funds in the global EM debt category saw net inflows of around €18bn ($21.25bn), Faassen said, citing Morningstar data. In total, there is close to €85bn invested in emerging market debt funds, which is dominated by investments in hard currency debt.

The fund with the most inflows was the Templeton Emerging Market Bond Fund, which is managed by Michael Hasenstab, attracting $4.4bn this year. “It’s surprising because in past years it had a lot of outflows,” Faassen added.

Performance has also been strong. According to FE, the emerging market fixed income sector as a whole is up 8.42% year-to-date and the global emerging market debt sector is up 5.37%.

“Managers were a bit cautious going into 2017 following the Trump election and were getting ready for higher inflation and interest rates, which would have a negative impact on emerging market bonds. But that did not materialise.

“[In 2017] a lot of the emerging market debt blended funds, which are a mixture of hard currency, local currency and corporate exposure, have done very well.”

Against this backdrop, Faassen compares two global emerging market debt funds, the Neuberger Berman Emerging Market Debt Fund and the Pictet Global Emerging Debt Fund.

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