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Emerging Markets Fixed Income

Given the extraordinary conditions in the current environment and investors’ ongoing search for income, emerging markets bonds offer distinctions over developed markets with potential advantages on yield and total return.

The VanEck Approach

VanEck believes a benchmark-agnostic, flexible approach is important because idiosyncrasies exist, and country and currency selections are imperative which allows for tactical shifts based on market conditions.

  • The Emerging Markets Bond Strategy employs an active, bottom-up investment process that has the flexibility to invest across all four debt sub-universes (sovereign and corporate, in local and hard currency), providing diversification across region, sector, currency, credit, duration, and maturity. The Strategy was among the first to combine local and hard currency bonds in one offering.

Local currency emerging markets sovereign bonds provide two distinct sources of return—local interest rates and potential currency appreciation—providing diversification away from U.S. interest rates.

  • The Emerging Markets Local Currency Bond Strategy seeks to track the JPMorgan GBI-EM Core Index and is the largest and most liquid approach that provides access to the local currency sovereign bond market.

Why Now

  1. We believe that relative to developed markets (“DM”), emerging markets (“EM”) responded quicker to inflation, remain in better shape financially, and benefit from higher commodity prices.
  2. Lower debt levels and higher real rates leave more policy room in emerging markets, and if traditional credit markets deteriorate and the U.S. faces downward pressure, the only remaining place to get a spread based purely on market supply/demand may be in emerging markets.
  3. In general, local currency debt is more insulated from default as the currency weakens, whereas emerging markets countries that fund themselves primarily in hard currency may find it increasingly difficult to repay their debt.

VanEck’s long history of looking beyond traditional markets is reflected in our 30-year history of investing in emerging markets debt. Today, we offer active and passive investment solutions, from flexible strategies that span asset classes to ones that target a specific area of the market to exploit opportunities across sovereigns and corporates in both hard and local currencies.