Roundtable – Emerging market debt THE PANEL Andreas Anthis


Equities portfolio manager Pension Protection Fund


function of policy and politics. We are looking for countries where there is a misperception. The market may have a stereotype associated with a country based on its past and we are doing our best to find green shoots of improvement. Our approach is identifying the good reform stories that take time to unfold. If we are investing early enough and before the rest of the market, we tend to get a lot of benefit for our clients. As that country’s risk premium declines, it becomes safer and tends to bring more capital to the country, further depressing spreads and pushing the currency higher. Our job is to be there when the country starts to make that turn, not wait until it begins before investing.


Anders Lundgren


Head of public markets and real estate NEST


Matthew Murphy, CFA, CAIA Senior institutional portfolio manager Eaton Vance


Jean de Kock


Principal, fixed income boutique Mercer


How can you know what is going on in 110 countries? Murphy: The first step is collecting infor- mation, which can be time consuming. About eight years ago we built a machine learning tool to save time. It scrapes infor- mation on countries from the internet and categorises it in a database. The machine can also translate foreign lan- guage documents and includes our view on the biases in a source. Each morning our regional teams cover what has hap- pened in those countries over the past 24 hours. From there, we figure out where we will spend time on the ground. We are looking for perception problems and binary events through legislation and occasionally we have times like March 2020 where there was irrational pricing. The emerging world is a big canvass and we use technology to make sure we do not miss anything, there is no slippage. When it comes to learning more, we visit that country as much as we can. Lundgren: We tend to use one manager for each asset class. It makes it purer. When it comes to emerging markets, we use a blended approach, but our fund is mainly hard currency.


What do you look for in a manager? 42 | portfolio institutional | June 2021 | issue 104


Lundgren: Their investment process, and whether it is repeatable, the team, their experience and how long they have worked together. Also, the organisation, if it is solid and if ESG is integrated into the selection of securities. When it comes to accessing information, which is impor- tant, as some emerging markets are not as transparent as others, the relationships the manager has in these markets becomes very important. How diversified is the team in terms of languages? Amundi’s team speaks 20 lan- guages, including Russian and Turkish. It is something we consider when picking a manager since it makes it easier for them to access information and build relation- ships in EM. Anthis: It is important to understand the strength of the team and the experience that comes with it. We also tend to look at the investment process. All managers can look at fundamentals to come up with an investment thesis, but we look at what each manager’s niche is. For example, we have identified strategies which


are more geopolitically driven


although they pay attention to the techni- cals and fundamentals of countries and regions. Where the value comes from is identifying any potential IMF interven- tion, reforms taking place or upcoming elections. Those would be the primary catalysts to extract value from this space. We tend to focus a lot on what differenti- ates strategies before moving ahead.


How reliable is independent data? Murphy: We do not use a lot of third-party information, primarily because we do not trust it. In emerging markets, the base case is that you do not trust anything you are given. You work to verify it. On ESG, we have a lot of entities provid- ing their views on various corporates and countries and there is nothing to deter- mine whether it is material. They all come with a lag in that the information is posted after the fact. There is no skin in the game. There is no way that third-party


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