Sergio Trigo Paz
CIO & Head of Emerging Markets Fixed Income
Emerging market debt: a diverse asset class
We unlock the full potential of emerging market debt with flexible strategies, robust analysis and risk management.
Emerging market (EM) debt is a vast and diverse investment universe, spanning over 140 countries and representing USD 3.4 trillion* in outstanding issues. Today, more than half of EM debt issuers are rated investment grade, reflecting the sector’s growing maturity.
However, this market is anything but static. Profound geopolitical shifts – from deglobalisation to supply chain localisation – are reshaping the EM landscape, creating both challenges and opportunities. These transformative trends, if navigated skilfully, can be seen as a source of potential alpha and diversification.
*Bloomberg Finance L.P.
A compelling case for emerging market debt
Access to the fastest-growing markets in the world
Attractive yields compared with developed markets
High diversification potential
A distinctive approach tailored to a fast-changing world
Our investment process is designed to effectively navigate the complexities of emerging markets, where global financial conditions can affect individual countries in different ways. However, depending solely on traditional fundamental analysis may not provide enough insight into the factors influencing performance across this diverse landscape. We use a multifaceted approach to maximise potential returns in different market environments.
- Assessing the influence of global financial conditions on each country's macroeconomic situation, asset quality, risk profile, and liquidity.
- Conducting rigorous country-level analysis to identify distinctive factors and to distinguish meaningful signals from short-term noise.
- Dynamically adjusting our asset allocation and country selection as financial conditions evolve.
- Implementing robust risk management, including appropriate portfolio constraints, to navigate shifting market regimes.
- Identifying countries with positive sustainability characteristics and exposure to impactful themes.
How about scheduling a discussion with one of our investment specialists to explore how the solutions we provide can help you diversify your portfolio and enhance returns?
Solutions tailored to your unique goals
UBP provides investors with a comprehensive range of emerging market debt (EMD) solutions to address diverse client needs. Our product line spans various emerging market segments, including local markets, hard currency sovereigns, and corporate credit.
Our EMD macro long/short hedge strategy leverages its ability to take both long and short positions to benefit from variations across the EM space. This allows the strategy to navigate geopolitical and macroeconomic volatility, capturing upside potential while mitigating downside risks.
Our unconstrained Income Opportunities and High Alpha Bond strategies employ a highly flexible approach, seizing attractive opportunities in forex, USD-denominated bonds, and local EM markets. By dynamically allocating across the EM debt universe, these strategies aim to reduce exposure to global volatility and diversify away from idiosyncratic risks.
Our strategies
We believe that unconstrained and flexible investment strategies are particularly well suited to capitalise on the opportunities in these dynamic markets.
EM Responsible Income Opportunities
Diversified income by capturing the yield of EM investment-grade bonds while minimising volatility and idiosyncratic risk.
EM Responsible High Alpha Bond
Total return maximisation and dynamic allocation across the full EM debt opportunity set to capture the most compelling risk-adjusted opportunities while seeking to limit drawdowns.
EM long/short strategy
Investments in promising EM stories while shorting deteriorating credit over a complete market cycle.
Looking to gain specific EM debt exposure?
We also propose targeted strategies in key segments
At UBP, we offer a comprehensive suite of innovative emerging market debt strategies designed to meet the diverse needs of our clients. From income-focused solutions to high alpha opportunities, frontier markets, and long/short funds, our product range spans the full emerging market debt spectrum, providing investors with the flexibility to navigate this dynamic landscape.
Investor Insights
Frequently asked questions about emerging market debt
Emerging markets are undergoing transformative changes driven by deglobalisation, nearshoring, post-pandemic economic recovery, geopolitical realignments, and the ESG-led energy transition. These influential trends create compelling investment opportunities, enhance EM debt's fundamental appeal, and expand the scope of alpha generation.
The divergent economic trajectories of individual EM countries are a crucial source of potential returns. By conducting rigorous analysis to identify winners and avoid losers, skilled active managers can exploit these dispersions to enhance alpha and optimise portfolio diversification. Investing selectively based on country-specific merits is crucial in this heterogeneous landscape.
Navigating the complexities of EMD requires a keen awareness of the risks involved. These include timing market entries and exits, benchmarking against fragmented indices, managing volatility spikes, factoring in macroeconomic uncertainties, and ensuring adequate liquidity. Managing these multifaceted risks while consistently capturing alpha opportunities demands specialist skills and resources.
Our investment process is designed to transform the complexities of EMD into opportunities. We employ a flexible and diversified approach, dynamically allocating across hard currency, local currency, and corporate debt segments to optimise risk-adjusted returns. Supported by in-depth research, we aim to identify high-potential countries and issuers while actively managing downside risks. This holistic strategy enables us to position portfolios for long-term growth while mitigating the impact of market fluctuations.
Meet the team
UBP's Emerging Markets Fixed Income team is headed by CIO Sergio Trigo Paz. The team's expertise spans the full spectrum of emerging market debt, with dedicated specialists in corporate credit, local currency bonds, hard currency sovereigns, and unconstrained strategies.
Key facts and figures
- Seasoned professionals leveraging 25+ years of experience and a strong track record in responsible emerging market debt investing.
- A stable and cohesive investment team, with senior members working together for over 16 years.
- The team shares the knowledge of an investment process that has generated robust alpha since 2006; this has been implemented in actively managed high-conviction strategies.
- A broad and complementary skill set enables the team to manage the full range of emerging market debt strategies. The team includes expertise in long-only, long/short, and ESG fund strategies.
Your contact
04.04.2024
Fixed income: Positive bias towards credit
We believe that we are at a shift in regime for fixed-income markets as central banks prepare the ground for potential rate cuts following the most aggressive tightening cycle since the 1970s.
