ernments inject equity and then leverage it up by selling it to investors. So, you can provide cheap financing for emerging markets. Freedman: Mechanisms like the IMF need to be involved as a backstop. Nash: Some of these things are being done, but not on a big scale. Lee: When it comes to ESG and climate, emerging markets are a challenge. When people talk about emissions, they point to the obvious countries that are the largest emitters, such as China building coal-fired power stations. But China spends on average over 15 times more investing in renewable energy than we do. So, the idea of assessing a coun- try as good or bad and putting a moral judgement on it is diffi- cult. A country can be good and bad at the same time, in the same way hydrocarbon companies also invest in renewable
energy. Guiding investors to make those decisions is challeng- ing because they are not black and white.
What’s your outlook for the mainstream fixed income market? Nash: Higher yields, flatter curves, wider credit spreads and a weaker dollar.
This time around it is not just the US that looks good. Emerg- ing markets tightened last year and now that inflation is relax- ing they can ease off the gas a little. We could get outflows from the US to a number of emerging markets for the yields on offer. Reedie: You could capture value from less duration-sensitive parts of the market and take more credit risk there. Nobody is predicting an imminent default cycle. Risk positions that benefit from good growth and corporate profitability are less reliant on spread levels being correct. We
April 2022 portfolio institutional roundtable: Fixed Income 21
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