HEAD-TO-HEAD: Neuberger Berman versus Pictet

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Introduction

Investors seem to have worried more about pandemic vulnerabilities in emerging markets than been attracted by the yield opportunities available in their debt so far this year.

The JP Morgan EMBI Global Diversified Index is down 0.27%, and the average emerging market debt fund available to Hong Kong retail investors has dropped 1.89% in value since the start of 2021, according to FE Fundinfo.

Nevertheless, several asset managers believe the sector offers potential.

T Rowe Price notes the attractive yields compared with developed markets, and is encouraged that improving economic growth is broadly supportive. The sentiment is shared by M&G, which highlights the appealing yields available in select emerging market local currency debt markets.

“Continuing economic growth should improve issuers’ fundamentals, while output gaps are expected to keep inflation under control and stronger current accounts than in 2013 are likely to mitigate the potential effects of US [asset purchase] tapering,” the firm wrote in a recent outlook paper.

But, the endorsement is not unequivocal.

Modestly attractive valuations, rising inflation and central bank interest rate hikes all threaten headwinds.

FSA asked Frankfurt-based Shannon Kirwin, senior manager research analyst at Morningstar to compare two emerging market bond funds: the Neuberger Berman Emerging Market Debt Hard Currency Fund and the Pictet Global Emerging Debt Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 21 July 2021)

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