External Hard Currency Debt
Emerging markets (EM) external debt includes U.S. dollar-denominated sovereign and quasi-sovereign bonds issued by countries that are identified by the World Bank Group as being “low-income economies” or those included in the J.P. Morgan Emerging Market Bond Index (EMBI). Since the launch of the J.P. Morgan EMBI in the early 1990s, the coverage of countries tracked by the index has expanded from just 10 to now more than 70 for the J.P. Morgan EMBI Global Diversified Index, the most widely used index for this asset class.
The evolution of the asset class has been supported by a secular trend toward greater stability and improving credit fundamentals of EM countries, which have grown significantly over the past several decades — both in terms of economic progress, as well as advancements in the strength of their institutions. Better monetary and fiscal policies in many EM countries have led to better economic management. This, in turn, has helped to improve capital reserves that allow EM countries to address short-term issues more effectively than in the past and increase their ability to repay debt. Importantly, EM countries have grown more resilient to external shocks, with a greater ability to navigate defaults, geopolitical tensions, and volatility in oil and other commodity prices.
Stone Harbor’s demonstrated ability in managing EM debt is rooted in teamwork with a 30-year history, a disciplined research and investment process, and the experience to make sound investment judgments. Among the most experienced in EM debt investing since 1990, we believe our portfolio management team has one of the longest running track records in the asset class.
In addition to the core strategy, which invests across the universe of EM opportunities, the strategy can also be managed with specific duration targets and can be tailored as either an investment grade or non-investment grade only portfolio.