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Emerging markets (EM) are prone to market inefficiencies. EM companies may overcompensate investors relative to downgrade and default risk, leading to an EM risk premium. Utilizing an investment process centered on deep, fundamental analysis and a robust quantitative toolkit, the Loomis Sayles Emerging Markets Debt team seeks to uncover mispriced EM credit opportunities and deliver the excess premium to investors.
Sources of alpha: inefficient pricing can result from a dynamic and idiosyncratic relationship.
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The portfolio managers work closely with Loomis Sayles’ firm-wide credit and macro/sovereign research resources to generate ideas across the investment universe. The team of EM sovereign and corporate credit specialists follow 70 EM countries and 600+ emerging markets corporate, sovereign, and quasi-sovereign issuers. The firm has over 20 research/trading resources dedicated to EMD located around the world.
EM corporates, on a ratings and duration-adjusted basis, consistently offer a spread premium to sovereign and US peers. Given this persistent premium, the team believes the value proposition in EM resides within the corporate space.
The fund seeks to minimize volatility and drawdown by following these investment parameters: Average account rating of IG and explicit CCC credit rating exclusion; issuer, sector and country diversification across more than 100 holdings; short duration to help minimize US rate risk (account duration: 2-3 years); straightforward portfolio construction without the use of derivatives and local currency.
The analyses and opinions referenced herein represent the subjective views of the author(s) as referenced, are as of the date shown and are subject to change without prior notice.
All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income and alternative investments. There is no assurance than any investment will meet its performance objectives of that losses will be avoided. There could be other differences across similar products in the same strategy. Investors should fully understand the risks and other relevant details associated with any investment prior to investing.
Highly experienced investment team led by portfolio managers, Elisabeth Colleran, CFA, David W. Rolley, CFA and Edgardo Sternberg. They each have over 34 years' industry experience and have worked together since 2006.
