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CONTRIBUTORS

Nicholas Hardingham, CFA

Portfolio Manager, Franklin Templeton Fixed Income

Stephanie Ouwendijk, CFA

Portfolio Manager, Research Analyst, Franklin Templeton Fixed Income

Robert Nelson, CFA

Portfolio Manager, Research Analyst, Franklin Templeton Fixed Income

Joanna Woods, CFA

Portfolio Manager, Research Analyst, Franklin Templeton Fixed Income

Carlos Ortiz

Research Analyst, Franklin Templeton Fixed Income

Jamie Altmann

Research Analyst, Franklin Templeton Fixed Income

Preview

Spreads on the lowest rated (C rated and below) segment of Emerging Market (“EM”) Debt have widened significantly in recent years, and now constitute over 40% of the total EMBI Global Diversified Spread, despite being only 5.3%1 of this index.

In this paper, we discuss some of the drivers of this valuation dislocation and argue that low correlations, alpha opportunities, and the potential for impactful ESG engagement are all reasons to stay invested in this segment of the asset class.

  1. Source: JP Morgan, as of April 30, 2023.

 

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