Outflows from emerging market debt during the 2013-2014 correction amounted to a significant US$31 billion. In the subsequent months, Investec AM has been encouraged by sustained inflows into the asset class as investors re-engaged with the asset class, attracted by the higher yields on offer. Certainly Investec’s own investor base has added to their holdings on average and new institutional clients have entered the asset class over the past year.
The period of continuous inflows came to an end in August, with some outflows from hard currency debt. According to the asset manager, this is entirely healthy – the asset class had performed well and some profit taking was inevitable – and it is likely there will be more two way movements in flows in the coming months.
While Investec AM does not expect 2015 industry net flows to reach the heady $40 to 80 billion levels, they do expect a gradual improvement. Given the scale of the 2013-2014 sell-off, the asset manager still views overall positioning as relatively light and expects supportive flows from institutional investors, particularly in the US, who are expected to address their under-allocation to the asset class. The broader reform agenda across many emerging markets should also help to sustain positive investor sentiment and encourage flows into emerging markets assets.
You may access the full report by Investec AM through this link.