Whats driving the strong returns in emerging-market debt?
The U.S. used to be the only engine for growth. Now, China is helping along — but it’s a very different process. China’s growth process is very commodity-driven, and commodity-based economies and commodity prices are soaring. What’s more, you have improving credit ratings in the [emerging-market] countries. Five years ago, 95% of the emerging-market nations were junk-rated. Today, more than 50% of the group is investment grade. We sense a continued long-term climb up the quality scale. That’s a perfect world for emerging markets. Q: What drives your investment philosophy and consequently your stunning returns? A: Country differentiation is important. We aren’t shy about staying away from some countries and being aggressively invested in others. What’s true for the asset class as a whole is not true for all countries. Even when we invest in those countries, there are still a lot of market imperfections. We try to exploit imperfections for our clients rather than get hooked by them. We
