Emerging market hard currency debt is often considered the turf of active investors. With 73 countries and 168 issuers in the JP Morgan EMBI Global Diversified – the flagship index for the asset class – many investors assume that there are plenty opportunities for active managers to add value and protect capital. However, the reality is different, many active managers in this asset class struggle to outperform their benchmark in a consistent manner and protect capital during periods of drawdown. There are a number of characteristics of the asset class that make it difficult for active managers to outperform and we believe that some of these challenges could be exacerbated by the Covid-19 crisis.
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