e-fundresearch.com: From a V-shaped recovery in Q1 to a summer full of global recessionary fears: What are your personal lessons learned from year-to-date market developments?
Dimitry Griko: Even though EM corporate high yield did have a V shaped recovery, when properly managed, risks can be and were controlled. Proper risk management led us to a flat 2018 and a strong performance in 2019. Recessionary fears had very minor effects on the portfolio throughout the summer with August being the only negative month this year.
e-fundresearch.com: How did your strategy manage to perform in this challenging market environment and which particular investment themes have delivered the strongest (worst) performance contribution on a year-to-date perspective?
Dimitry Griko: The strategy, showed stable returns with low volatility. With Central Banks becoming more dovish, the hunt for yield and continued low defaults provided strong technical support. The asset class was well bid throughout the year up to primary elections in Argentina, where we have seen quite a bit of volatility and as well as very interesting opportunities in the corporate space.
e-fundresearch.com: How optimistic is your view into the future and what obstacles and challenges should investors be prepared to overcome in the remainder of 2019 and early 2020? To what extent does your current portfolio positioning take those expectations into account?
Dimitry Griko: Given that growth is widely expected to increase in 2020 in emerging economies, they look especially attractive versus developed markets. With lucrative higher yields, limited risks and real diversification opportunities away from developed markets risks, we expect the inflows will continue to support the asset class.
e-fundresearch.com: Why should investors consider an (increase in) allocation to your asset class and in particular your strategy in the current environment?
Dimitry Griko: In light of global uncertainties and lack of real yields, EM corporate high yield is one of the few asset classes that exhibit attractive risk/reward both on empirical and fundamental basis.
Low volatility of the strategy, outperformance on the downside, low correlation to other risky asset classes, low drawdowns combined with high yields and lower defaults than those in DM – all make it an attractive allocation.