For local currency debt strategies, Institutional investors are making big moves into emerging markets and are taking broad strides to catch up to allocations previously made to emerging markets bonds denominated in U.S. Dollars.
Local currency and Emerging markets
According to many sources advance pension plans and sovereign wealth funds are expected to rap the asset class for better risk-adjusted returns, diversification and exposure to fast-growing economies and currencies. In the last two years, in the U.S the asset class has seen explosive growth, with the rise in pension funds and the expansion of hiring money management firms that blend a mix of hard- and local-currency bonds in one portfolio.
Investment in Emerging Markets
In 2009 as per InterSec Research LLC, a research and analytics firm, confirmed that the new institutional mandates for emerging markets local currency debt in 2010 shot to $1 billion, up from $115 million of new mandates. The latest available data show that U.S. institutional investors were on track to double 2010’s level. With a combined asset value of more than $2 billion in 2011 was conducted by Investment consultant NEPC LLC, Cambridge, Mass. In 2011 at Mercer, search activity in the U.S. Cooled after booming a year earlier. In emerging markets debt and local currency debt in 2008, local currency searches shot to 29 in 2010 then fell in 2011 to 15 as overall search activity subsided. Brendan Cooper, head of analytics at InterSec, Stamford, Conn said that 2009 saw a pretty dramatic spike in new emerging markets debt allocations by U.S. institutional investors but they were still primarily U.S. Dollar-based.
According to Thomas Brock, CEO of Stone Harbor in New York, confirmed that the process is global and the trend of increasing interest from official institutions around the world, including from sovereign wealth funds, and those mandates can expand to some large extensions.