By Drew Carter | Pensions & Investments | 09.19.11
Emerging markets bonds and equities have taken divergent paths in 2011 despite having similarly strong long-term outlooks.
Emerging markets bonds have taken on some of the safe-haven status of their developed-markets cousins, while emerging markets equity performance has lagged that in developed markets.
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“Emerging markets debt has been a marvelous way for investors to get exposure to emerging markets currencies, especially for those investors in developed markets” whose currencies have been comparatively weaker, said James B. “Jamie” Rosenwald III, co-founder and senior portfolio manager for Asian equities at Dalton Investments LLC, Santa Monica, Calif.
Investors’ concerns
But equity investors still have concerns about transparency, regulatory and political issues in the emerging world. “There are a lot more potential problems one experiences when one plays in the emerging markets equity space,” Mr. Rosenwald said, although depressed stock valuations do build in some safety for investors, as do good balance sheets and diversification of revenues on the part of some companies based in emerging markets. “The way that emerging markets equities have been beaten recently provides phenomenal opportunity,” he said. Dalton runs a combined $1.3 billion in emerging markets equity and distressed debt strategies.
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