Be careful in emerging market bonds

Three key factors – and China - have this portfolio manager treading cautiously

Michael Ryval 14 February, 2019 | 6:00PM

Last year proved to be a wake-up call for investors in emerging market bonds. And it was largely due to a combination of three factors, says David Nava, senior portfolio manager, global fixed income and currencies, emerging markets at Toronto-based RBC Global Asset Management Inc. This year could be equally challenging, says Nava, as China remains the key to emerging market asset performance.

“In April 2018, the market realized that the emerging market [EM] outlook is deteriorating. EM growth is a very important driver for sentiment and appetite for EM assets. That was the first key factor,” says Nava, lead manager of the $846.9 million RBC Emerging Markets Bond Fund F .

The second factor was the cycle of interest rate hikes by the U.S. Federal Reserve. While carefully telegraphed to the market, it started to impact global liquidity. “The era of easy money was coming to an end,” says Nava, a native of Mexico City who earned a BSc in economics from the prestigious Instituto Technologico Autonomo de Mexico in 1995 and in 2001 immigrated to Canada, where he graduated with an MBA from the Rotman School of Management in 2004. 

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Michael Ryval

Michael Ryval  

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