Insight's Rodica Glavan on EMD: "Opportunities exist in multiple directions"

Insight Investment's EMD-Portfolio Manager Rodica Glavan on why the world is going through a structural shift and how the slowdown and economic transformation in China is creating both challenges as well as opportunities for mutli-directional strategies. Managers | 18.02.2016 12:00 Uhr
Rodica Glavan, Portfolio Manager, Fixed Income Group, Insight Investment / ©  Insight Investment
Rodica Glavan, Portfolio Manager, Fixed Income Group, Insight Investment / © Insight Investment
Archiv-Beitrag: Dieser Artikel ist älter als ein Jahr. What are your personal lessons learned from 2015 market developments? Rodica Glavan: Big lessons from 2015; the world is going through a structural shift related to the slowdown and economic transformation in China. This is creating multi-directional opportunities across EM. The relative strengths/weaknesses across EM countries heading in to this new environment will determine market outcomes. While some countries will suffer due to lack of reform, fiscal weakness or excessive commodity exposure, others will benefit whether having implemented structural reforms, possess strong institutions attuned to adjusting to a new reality or having a positive exposure to lower commodity prices. Therefore, EM is becoming increasingly diverse and increasingly, opportunities exist in multiple directions. How would you describe your investment strategy in one sentence?

Rodica Glavan: The Insight emerging market debt strategy invests on a ‘best ideas’ basis, unrestricted by the constraints of investing against a traditional index. To what extent has your strategy been able to benefit from last year's market environment and which particular investment themes have delivered the strongest performance contribution?

Rodica Glavan: 2015 was an extremely challenging year for EMD assets. Volality stemming from worries over slowing Chinese growth, sharp falls in commodity prices, idiosyncratic political risk (Brazil) and the prospect of higher interest rates in the US led to double-digit falls in local currency bond indices. In this environment our ability to act nimbly and take long and short positions meant that we could avoid the some of the sharp drawdowns. With regards to the new year: How optimistic is your view into the future and what obstacles and challenges will your strategy need to overcome in 2016?

Rodica Glavan: For the near term, commodity prices and China growth data and fx policies will remain the main drivers of price action in EM, as volatility stays elevated and differentiation across countries remains low.  However, valuations across all EM debt asset classes have adjusted significantly.  Thus, we maintain a defensive strategy and tactical trading approach for the immediate term but acknowledge that value has been created.  We will revise our stance once we get more clarity on China growth and fx policies and see some stabilization in commodity prices. How would rising interest rates affect your strategy?

Rodica Glavan: The start of the  Fed interest rate hiking cycle has been anticipated for so long that its effect on EM debt may be muted as it decreases uncertainty and may also be symptomatic of diminished concerns on global growth. Why should investors consider an increase in allocation to your strategy in 2016?

Rodica Glavan: Emerging market debt is a global asset class that offers investors the potential return and diversification benefits of investing in economies at different stages of economic and structural development. We believe there is a range of attractive opportunities, including interest rate, credit and currency plays, for investors able to identify the most appealing prospects and who have the ability to take long and short positions within their strategy. Thank You!

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