Emerging Market Investment Grade Debt a source of diversification for insurers

In a low-yield world, Emerging Market Investment Grade Debt can offer attractive long-term returns and a source of diversification for insurers.

Since the global financial crisis, we continue to live in an increasingly low yield world. There has been hope that highly accommodative rates across the major developed economies would eventually drive a meaningful acceleration in global GDP and a normalised rate environment.

However, that has not happened. Instead, after seeing short term European rates hold in negative territory for several years and US rates at historical lows, we saw global rates driven even lower by the COVID-19 pandemic, which caused the most highly synchronised contraction in global GDP in modern history.

While uncertainty remains high, we do think it is reasonable to expect that this environment of extremely low interest rates is here to stay for at least the next few years.

Uncovering potential higher yields in Emerging Market Debt

Our latest white paper reveals how Emerging Market Investment Grade Debt could help you capture higher yields, while maintaining credit quality and capital requirements.

In this low-yielding environment, Emerging Market Investment Grade Debt could offer:

  • A source of attractive long-term returns
  • A diverse asset class spanning over 70 countries
  • Strong diversification by company, sector and location
  • Attractive relative value versus developed market debt
  • A regulatory capital treatment where Emerging Markets hard currency investment grade bonds get the same rating category treatment as Developed Markets bonds
  • Increased Solvency II efficiency

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information

  • Where individuals or the business have expressed opinions, they are based upon current market conditions, may from those of other investment professionals and are subject to change without notice.

    This webpage is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy.

    Data as at 31 December 2020, unless otherwise stated.