Emerging market debt (EMD) is a versatile asset. It offers equity investors risk mitigation potential with modest return dilution. For fixed income investors willing to move out the risk spectrum, EMD presents a significant yield pick-up opportunity. The COVID-19 pandemic led to a notable rise in indebtedness in some countries and, now more than ever, investors need to be comfortable with headline and idiosyncratic risk, look beyond average index level metrics and be mindful of individual issuer risks. However, the broad move higher in yields may present a much more rewarding entry point for those investors prepared to take a closer look.
Key points for investors to keep in mind include: