Capital Allocators – Inside the Institutional Investment Industry Thomas Haugaard - Hard Currency Emerging Markets Debt at JHI (EP.356)
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Dec 14, 2023 Thomas Haugaard, a seasoned portfolio manager at Janus Henderson Investors with decades of experience in strategy and academia, shares fascinating insights into hard currency emerging markets debt. He discusses the misconceptions surrounding this sector and highlights the significant opportunities it offers. The conversation dives into managing sovereign credit risk, revealing the complexities of monitoring various nations and underscoring the impact of governance on investment decisions. Additionally, Haugaard illustrates market inefficiencies using Costa Rica as a case study, showcasing the nuances of risk assessment.
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Early Interest in Emerging Markets
- Thomas Haugaard's interest in emerging markets began with academic curiosity during university in the late '90s, sparked by financial crises.
- Early research highlighted the impact of policy decisions, the power of financial markets, and the importance of self-fulfilling expectations.
Hard vs. Local Currency Debt
- Emerging market hard currency debt involves countries issuing bonds in USD or Euros, focusing on credit risk.
- This differs from local currency debt, dominated by local FX risk, where countries issue bonds in their own currency.
Regional Diversification
- The hard currency debt market has a wide distribution across the globe, with over 80 countries issuing bonds.
- China plays a smaller role (4.5%) compared to other EM asset classes, but the regional distribution remains relatively equal.
