What emerging market exposure does Reach’s pension plan hold in its debt portfolios? Paul Rhodes: We have exposure to emerging markets through our default fund. For many small and medium-sized defined contribution plans, looking outside of bundled products for something more specific can be difficult. Another considera- tion of greater exposure is whether the reward is warranted, given the risks.
There are many positives to investing in emerging markets (EM), but when the US dollar is as high as it is now the risk of emerging market debt defaulting rises. So the risks are high for defined contribution (DC) members to invest in these assets right now, but there could be benefits for those with a longer time horizon.
8 September 2022 portfolio institutional roundtable: Emerging market debt
Is Reach’s time horizon long enough to consider expanding its interests here? Rhodes: We consider lots of things. Looking at the next decade, emerging markets could offer more growth than developed markets (DM). It is something to look at.
How important are emerging markets to the schemes you work with, Alan? Alan Pickering: In defined contribution land, emerging markets play an important role during the growth phase. The challenge is to determine how much to compartmentalise the worldwide exposures during that period. Many of us have bought into the argument that diversification is a free lunch, that it gives equity-like upside without the
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