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Title

An Emerging Paradox: Why Less Risk Delivers More Return in Emerging Markets

Event Description

Many investors regard emerging markets (EM) as an exotic asset class which properly belongs in the high-risk “alpha” bucket of an asset allocation strategy, alongside hedge funds, private equity, venture capital, junk bonds, or aggressive public equity portfolios. This conception of EM as a high risk/ high return asset class has in turn caused investors to approach EM diversification in a high-risk way, by favoring EM equities over EM bonds, junk EM credit over investment grade EM credit, and high yielding EM local currency risk over hard-currency EM bonds.  Over the past 10 years, this strategy has largely been a failure, as EM equities have significantly underperformed US stocks and EM local bonds have disappointed amid an overall strong dollar trend.  In fact, over the past 10 years hard currency EM bonds have proven to be by far the best performing EM asset class, with the JP Morgan EMBI Global Bond Index outperforming both EM equities (MSCI EM Equity Index) and EM local bonds (Bloomberg Barclays EM Local Currency government Bond Index) by more than 300 basis points per annum over the past decade. Hard currency EM bonds have even outperformed EM stocks on a 20 year total return horizon, delivering by a large margin the highest Sharpe Ratio of any emerging markets asset class.

In this presentation, we’ll review the recent historical performance of major EM asst classes, and propose some explanations for the recent disappointing performance of EM equities and local currencies relative to expectations.  We’ll assess the long term performance of EM hard currency debt, and evaluate the real risk of EM sovereign bonds- even accounting for periodic episodes of sovereign distress- relative to other EM investments. Finally we’ll consider whether the historic return premium of EM hard currency bonds is likely to be sustained on a prospective basis.


To view Will Slaughter's bio - click here!


Event Type

Career; Featured

Education Topic

Economics

Start Time

12/4/2019 11:45 AM

End Time

12/4/2019 1:00 PM

Event City

Milwaukee

Event State/Province

Wisconsin

Event Country

USA

Event Region

Americas

Location Info

The University Club
924 E. Wells Street
Milwaukee, WI 53202

Speaker

Will Slaughter

CE Credits

1

SER Credit

N/A

Currency

USD

Member Price

$15

Non-Member Price

$30

Candidate Price

$15 / $10 University Student

Registration

​To Register - click here!
Please register by November 27th.

All Day Event

 

Recurrence

 

Event Link

An Emerging Paradox: Why Less Risk Delivers More Return in Emerging Markets

Event Link Leads To New Tab

Yes

Event Short Info

In this presentation, we’ll review the recent historical performance of major EM asst classes, and propose some explanations for the recent disappointing performance of EM equities and local currencies relative to expectations.  We’ll assess the long term performance of EM hard currency debt, and evaluate the real risk of EM sovereign bonds- even accounting for periodic episodes of sovereign distress- relative to other EM investments. Finally we’ll consider whether the historic return premium of EM hard currency bonds is likely to be sustained on a prospective basis.

Attachments

Content Type: MyCFA Calendar
Created at 10/23/2019 11:38 AM by bmatthias@adminproserv.com
Last modified at 10/23/2019 11:39 AM by bmatthias@adminproserv.com