EM Equity & EM Debt finish Q4 in better shape than expected
CAMRADATA, a leading provider of data and analysis for institutional investors, has just published two of its Emerging Market Equities and Emerging Market Debt investment reports for Q4 2018, which chart the performance of investments and asset managers.
Emerging Market Equities (EME) suffered heavy losses during 2018, however, they finished the year more strongly in relative terms, sustaining a 7.5% loss of value during Q4, compared with a 13.5% slide for the S&P500 and a 13.4% decline for the MSCI World.
Emerging market debt was under pressure for much of 2018, from a strong US dollar and dynamic US economic performance. But the sector finished the year in better shape, with a weaker US outlook for 2019 and more dovish signals from the Federal Reserve, easing the stress on EM bond issuers of servicing their USD-denominated debt.
Sean Thompson, Managing Director, CAMRADATA said, “Emerging market equities battled for much of 2018, in the face of a rising US dollar and fallout from the US-China trade standoff. Going forward, many emerging markets are working to diversify from a reliance on US dollar-sensitive exports to developed economies.
“At a time of slowing global growth, emerging markets are expected to grow substantially faster during 2019 than advanced economies, according to International Monetary Fund forecasts. For countries under fire during 2018, such as Argentina, Turkey and Brazil, there appears to be some early signs of recovery.
“Valuations for EM debt and currencies also appear attractive by historical standards. Heavy sell offs during 2018 have left EM bond spreads substantially higher (and pricing lower) than 12 months ago and this provides an entry point for investors with the appropriate risk appetite. But this is a sector prone to large performance variance, so strong country analysis will be needed to spot the best opportunities this year.”
Q4 highlights for Emerging Market Equities and Emerging Market Debt:
Emerging Market Equities
- During Q4 2018, no managers in the CAMRADATA EME universe succeeded in delivering positive returns. Over a three-year period, the performance results are much more encouraging, with 100% of products in the survey achieving a breakeven or positive return.
- Unsurprisingly, these performance challenges led to just over US$7bn being withdrawn from the universe over the quarter.
- The downward movement of equities valuations combined with negative outflows from the universe led to a decrease of over US$60bn in assets under management across the universe since Q3.
- T Rowe Price, Inc. achieved the greatest asset inflows during the quarter with $2,054m added to their EME portfolios. AQR Capital Management followed with $1,784m in asset inflows followed by Baillie Gifford, Victory Capital and Investec Asset Management.
Emerging Market Debt
- The CAMRADATA EMD universe experienced aggregate net outflows of almost US$3.5 bn during Q4 2018, continuing the trend of net redemptions witnessed during the two preceding quarters.
- Q4 2018 saw a decrease in positive performance with only 44% of products achieving a breakeven or positive return, compared to 61% in Q3 2018.
- Assets under management in the EMD universe are now slightly less than US$250bn, meaning that the segment has seen its assets contract by US$5.5bn over the past 12 months.
- Investec Asset Management had the largest asset inflows totalling $1,245m during the quarter. They were followed by T Rowe Price, PineBridge Investments, TCW and Fidelity International.
Sean Thompson concludes, “Investors can keep abreast of issues that are likely to affect the markets using CAMRADATA Live. This tool monitors the strategies of asset managers, keeping investors up to date on what’s happening across hundreds of asset classes and helping ensure they make informed investment decisions.”