Local currency EMD – Why it might be time to reconsider an active allocation

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Investment Insights

An allocation to passive or smart beta strategies for local currency emerging market debt (EMD) can provide an effective and low-cost way to access the broader market, but there are a number of potential benefits of an active allocation to consider. Firstly, certain benchmarks restrict the opportunity set available due to construction methodologies and constraints. An active approach provides investors with the broadest possible investible universe. Access to a broader range of markets and instruments could offer increased and more varied sources of alpha and can help to provide greater diversification. Secondly, an active approach offers a more deliberate allocation of capital and can help mitigate some of the unintended consequences of index construction methodologies. The starting point for the construction