3 Questions to Joseph Mouawad on Emerging Market Debt

Emerging Market Debt

In a prolonged period of very low or even negative interest rates in developed markets, emerging market debt can play a key role in investors’ fixed income allocation.

Discover the views of Joseph Mouawad, Fund Manager at Carmignac:

1. Why invest now in emerging market debt?

I would highlight three main reasons for investing in emerging market debt today:

The first one is to escape the financial repression: developed markets offer low and most negative yields adjusted for inflation since the second world war, while the emerging world is the only place that still offers positive yields even in real terms.

The second reason is because the market timing is right: our central scenario for emerging markets is a constructive growth prospect with the continuation of the post-pandemic recovery and expansionary policy. This constructive growth narrative should not be impacted by the gradual Federal Reserve normalization. Furthermore, emerging markets tend to benefit from an inflationary environment as these countries are rich in commodities and manufactured goods which act as an inflation hedge.

And last but not least, the large investment universe and liquidity offered by emerging markets is a real bulk of opportunities. As an example, emerging market debt represents more than 30% of the global bond universe, with China being the second biggest bond market1.

2. What is your view on the current environment?

The global recovery from the reopening of economies has resulted in a faster rebound in demand than in supply in many sectors creating several bottlenecks. These bottlenecks are expected to ease gradually, but inflationary pressures will persist to varying degrees in different regions, as demand remains extremely strong across the various regions. And the recent sell-off on rates largely reflects central banks turning more cautious with respect to elevated inflation levels globally. As an example, in this context, we have a cautious positioning on core rates via short positions on the short end of the US curve and we favor emerging local debt which is attractive in terms of fundamentals. Indeed, positive real yields are rare in the developed world where most interest rates are well below the inflation rates they are witnessing.

3. What is your approach to emerging market debt?

Our approach in our Carmignac Portfolio EM debt fund is quite unique, thanks to three main differentiating characteristics:
First of all, we implement a highly flexible investment process. The fund’s value proposition is its flexibility to operate within a large investment universe while benefitting from a wide range of risk management tools, allowing it to build attractive risk-adjusted portfolios at any point in the cycle.
Also, the strategy we deploy has a solid track record, as it was initially run in our multi-asset emerging Fund Carmignac Portfolio Emerging Patrimoine since September 2015. This approach proved its capabilities by demonstrating attractive absolute and relative performance.
In recognition of the Fund’s investment approach, Carmignac Portfolio EM Debt is rated 5 stars by Morningstar while I am rated AAA by Citywire2.
Finally, Carmignac Portfolio EM Debt has a sustainable objective: the Fund follows a socially responsible investment approach and aims to invest in countries that are making progress in some or all of the three Environment (E), Social (S) and Governance (G) dimensions. The Fund is also classified Article 9 according to the SFDR3.

Carmignac Portfolio EM Debt in a nutshell

Carmignac Portfolio EM Debt is an emerging market fund aiming to capture bond and currency opportunities with a sustainable approach in all market conditions. The Fund’s mission is to outperform emerging fixed income markets (represented by the reference indicator4 while having a positive impact on society and the environment. The strategy implements a total return approach striving to deliver sustainable positive returns with an attractive Sharpe ratio whatever the market environment over the investment horizon of 3 years.


The proof of the Fund’s ability to fulfil its mandate is in the numbers:



3-year cumulated performance5

1st percentile


of its Morningstar category5 for its performance over 3 years

1st percentile


of its Morningstar category5 for its Sharpe ratio over 3 years

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