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We believe that emerging markets are only partially efficient and that fundamentally-driven, active management of emerging market fixed income portfolios can add value for clients. A fundamentally-based diversified approach, one that has the flexibility to access the full breath of emerging market opportunities, may provide a competitive return experience while seeking to minimize concentration and liquidity risk.

Investment Approach

The Emerging Markets Fixed Income team's investment process can be summarized as global risk analysis, country research, relative value comparison, issue selection and portfolio construction with the index as the point of departure. Global risk analysis examines risk appetite measures, capital flows and growth trends, and it creates the context for portfolio construction. Country research focuses on macro policy, economic growth, and balance of payments trends. Countries with similar risk profiles are placed in ‘risk tiers’ to better quantify aggregate risk and make the portfolio’s risk positioning consistent with the global risk outlook. Country and relative value analysis determines the weighting of countries within the same risk tier and considers out of benchmark investments like agency, local currency and corporate debt as an alternative way to gain desired country exposure.

Distinguishing Features

  • Firm has managed emerging markets assets as part of multi-sector fixed income portfolios since 1989
  • A deep and stable investment team
  • An emphasis on risk-adjusted returns
  • An extensive commitment to fundamental fixed income research
  • Portfolio construction within a rigorous risk management framework
  • Excellent historical track record

Investment Process

Country tiering
  • Fundamental analysis of key economic variables drive our risk tiering approach
Country relative value
  • Comparison of countries within risk tiers
Sector risk
  • Global investment environment creates the context for portfolio construction
Issue selection
  • Analyze the shape and slope of sovereign yield curve
  • Consider technical factors
  • Evaluate exposure to related but out-of-benchmark investments as another way to add value and gain country exposure
Portfolio construction
  • The JPMorgan Emerging Market Bond Index Global (EMBIG) is the point of departure for constructing a portfolio and setting up exposure sizes
  • Positions are regularly reevaluated to examine spreads and fundamentals
  • Off index exposures will be used to gain country exposure with greater risk adjusted return potential
Columbia Management and its affiliate Threadneedle Investments collaborate to manage certain portfolios in this strategy. This collaboration adds significant resources and expands our global research capabilities.