Capital Ideas^TM

The fast-paced evolution of EMD as an asset class necessitates an investment approach that can adapt swiftly. At its inception in the mid-1990s, EMD was a relatively narrow asset class consisting of just 12-15 countries issuing hard currency debt. This was often in response to crises in those countries. As illustrated in the chart below, little changed until the early 2000s when local currency debt bonds and corporate bonds were introduced. Since then, the asset class has gradually expanded to encompass almost 70 countries¹, issuing a broader range of debt instruments. In addition, some countries have made significant progress in establishing local yield curves, reducing their vulnerability to fluctuations in the US dollar and enhancing stability.

The market has developed into a mainstream asset class

Investors cannot invest directly in the index.
Data as at 31 December 2022, in US dollar terms. Indices: JPMorgan EMBI Global Index, JPMorgan GBI-EM Broad Index, JPMorgan CEMBI Broad Index, Bloomberg EMGIL Bond Index. Investable universe based on market value of indices used. Sources: JPMorgan, Bloomberg

In this Q&A, emerging market debt (EMD) portfolio manager Kirstie Spence discusses how to plan for the long-term success of managing the asset class.

1. As at September 2023. Based on JPMorgan EMBI Global Diversified Index.
   Source: JPMorgan