and tenders – you have negative net supply for the third year in a row at between $40bn (£31.9bn) and $50bn (£39.9bn) in the corporate landscape, which is significant. Today’s headlines report on the expansion of emerging market debt. They point out that there may be a bubble in the corporate market, but this is not necessarily true for the region. This is much more Asia- related: if you look at Latin American corporates, net supply has shrank significantly. Deltcheva: Russia has had to deleverage, so there has been net-negative supply for a fifth successive year. Latin America’s going through the same cycle. In Brazil, for example, there is not the same demand for credit as there once was. Argentina, to a certain extent, is shrinking as well. It’s more of a cyclical issue than anything else. Collins: There is a narrative of the markets getting bigger and expanding and it’s great that managers can take on more assets. The size of the market is $24trn (£19.1trn), but the indices amount to around $8trn (£6.3trn) so perhaps that’s the real playing field because a ton of that $24trn is China and India, which you cannot really access. It is not a one-way street and people should be aware of that. Willsher: There’s lots of positivity around and maybe I’m a contrarian, but it just makes me slightly nerv- ous, that’s all.
PI: What are you expecting to see in this space during the second half of the year? Mordezki: Latin America had an extremely good first half of the year, with returns over 10%. As a result of a difficult 2018, we started the year with attractive valuations. The change in stance at the Fed was an obvious push on the Latin American asset classes which were already cheaply priced. I felt optimistic at the beginning of the year as a result of the valuations and fundamentals. Indeed, this could hopefully be another year of two-digit returns on credit. Trow: Short-term it looks quite constructive. My concern is that in the longer term, wherever we arrive at in the trade talks, the damage has been done.
20 June–July 2019 portfolio institutional roundtable: Emerging market debt
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