Emerging market debt – missing piece of the cashflow matching puzzle
Cashflow matching strategies are customised investment solutions, designed to enable clients such as pension schemes or insurance companies to meet their liabilities. We believe that emerging market fixed income has an important role to play in designing cashflow matching strategies.
Including an allocation to EM IG fixed income within a matching portfolio can be an efficient method of improving diversification, whilst increasing the portfolio’s risk-adjusted return potential.
Historically, matching portfolios have concentrated on the developed market (DM) investment grade (IG) universe without considering the benefits of investment grade-rated emerging market (EM) fixed income.
At LGIM, we aim to consider the entire global fixed income opportunity set in order to meet our client’s specific cashflow requirements. Including an allocation to EM IG fixed income within a matching portfolio can be an efficient method of improving diversification, whilst increasing the portfolio’s risk-adjusted return potential.
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