Emerging markets: no ESG, no fun

Vontobel
By November 4, 2019 18:41

Emerging markets: no ESG, no fun

Why active management combined with a sustainable approach can open up new horizons 

Increasing emerging-market exposure with a keen eye on ESG1 As active asset managers with strategic and tactical views on multi asset portfolios, we often get questions regarding the “right” weighting of emerging markets. We believe a level of up to 20% is appropriate provided you manage these assets in a sustainable manner (see figure 16 on page 14). Multiple third-party studies confirm that ESG-compliant investing reduces risks and improves returns, particularly for emerging markets. We consider emerging-market equities and hard-currency bonds strategic investments, alongside more traditional benchmark components such as developed-market equities and bonds as well as cash. Emerging-market bonds in local currency are more of a tactical play but can be particularly attractive when employed at the right time. To engage in the latter segment, you also need to anticipate a strengthening of emerging-market currencies against the US dollar. If you still harbor doubts about emerging markets, consider the broad downward move in central banks’ benchmark rates, and the frozen-solid yields of many long-maturity government bonds in Europe. Therefore, if you’re thinking about getting more active in emerging markets – ESGellent, you’ve come to the right place.

Vontobel
By November 4, 2019 18:41

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