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Vontobel PM: investors are missing the corporate EMD opportunity

Vontobel PM: investors are missing the corporate EMD opportunity

Investors are neglecting opportunities in the emerging markets corporate bond space, Vontobel's Wouter Van Overfelt has told Citywire Switzerland.

Van Overfelt (pictured) is a senior portfolio manager on Vontobel's emerging markets corporate bond team.

He believes that new opportunities are arising as high-growth companies seek to gain capital without losing ownership.

He said: 'Many companies have bonds outstanding and are not listed on the stock exchange. I think sometimes these are interesting opportunities. They have a sizeable risk premium, somewhere between equity and fixed income. They offer reasonably high coupons, but still the protection of a bond.'

Default fears

Van Overfelt also said that he believes default risks are being overblown by fearful investors.

'People are very afraid of defaults because they associate it with the loss of their investment, but in emerging markets you usually get the chance to restructure and renegotiate your claim. 

'These companies are very important for the country they're based in, for employment or the service they provide, and the government is often an indirect shareholder. This means the default risk is a bit lower,' he said.

To reduce risk further, Van Overfelt argued that diversification is the way to go. 'Being diversified and not taking outside bets is very important. Look at the volatility of the bond and look for companies that are not in the same business or the same region.

'Take into account the political situation and meet with the management. Asking them questions gives you an insight you can't get by reading a balance sheet.'

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