TORONTO and BOSTON, Oct. 2, 2017 /CNW/ -- Manulife Asset Management urges institutional investors to consider a strategic allocation approach to Emerging Market Debt, rather than the prevalent tactical approach, in a new white paper released today.
Authors and portfolio managers Paolo Valle and Roberto Sanchez-Dahl, of the firm's emerging markets debt team, believe investors in aggregate are under-allocated to the EMD asset class, and that taking another look might assist in the search for yield.
"The narrative for emerging economies has changed, and the market – along with EM economies – has become more sophisticated. It is time, we believe, to view the asset class in another light," they write.
They cite several reasons for their view:
- Constructive fundamentals. When compared with advanced economies, many emerging economies have lower debt-to-GDP ratio, and the GDP growth differential between the two continues to widen.
- Improving credit profile. The secular decline in credit spreads is indicative of progress in structural reforms and the growth-oriented policy agendas of many governments within the EMD sovereign universe.
- Favorable demographic profiles exist relative to many of EMD's advanced economy peers, in particular, a burgeoning middle class population and younger consumers.
- Attractive return potential. There is historical evidence of positive results when using a long-term investment horizon.
"We believe that a flexible approach – one that uses a dynamic allocation to hard currency, sovereign and corporate debt, as well as tactical allocations to local currency sovereign debt – offers the most value for investors. It is also a good way of keeping pace with changes to the market while tapping into the opportunities that the asset class has to offer," the authors say.
In summary, they note: "Bolstered by strong economic and demographic fundamentals, attractive risk/return profiles and portfolio diversification benefits, we believe EMD should be considered a strategic allocation decision rather than a tactical asset allocation embedded within a traditional investment framework."
About Manulife Asset Management
Manulife Asset Management is the global asset management arm of Manulife Financial Corporation ("Manulife"). We provide comprehensive asset management solutions for investors across a broad range of public and private asset classes, as well as asset allocation solutions. We also provide portfolio management for affiliated retail Manulife and John Hancock product offerings. Our investment solutions include public and private equities and fixed income, timberland, farmland, real estate, power and infrastructure, oil and gas, renewable energy, and mezzanine debt. We operate in the United States, Canada, Brazil, the United Kingdom, New Zealand, Australia, Japan, Hong Kong, Singapore, Taiwan, Indonesia, Thailand, Vietnam, Malaysia, the Philippines, as well as through a China joint venture, Manulife TEDA. We also serve investors in select European, Middle Eastern and Latin American markets.
As at June 30, 2017, assets under management for Manulife Asset Management were approximately C$480 billion (US$370 billion, GBP£285 billion, EUR€324 billion). Additional information may be found at ManulifeAM.com.
Manulife Financial Corporation is a leading international financial services group that helps people achieve their dreams and aspirations by putting customers' needs first and providing the right advice and solutions. We operate primarily as John Hancock in the United States and Manulife elsewhere. We provide financial advice, insurance, as well as wealth and asset management solutions for individuals, groups and institutions. At the end of 2016, we had approximately 35,000 employees, 70,000 agents, and thousands of distribution partners, serving more than 22 million customers. As of June 30, 2017, we had over $1 trillion (US$780 billion) in assets under management and administration, and in the previous 12 months we made $26.7 billion in payments to our customers. Our principal operations are in Asia, Canada and the United States where we have served customers for more than 100 years. With our global headquarters in Toronto, Canada, we trade as 'MFC' on the Toronto, New York, and the Philippine stock exchanges and under '945' in Hong Kong. Follow Manulife on Twitter @ManulifeNews or visit www.manulife.com or www.johnhancock.com.
SOURCE Manulife Asset Management