In 2016, many asset managers around the world were high on Mexico as an up-and-coming emerging markets’ star. Recommendations to buy the peso or buy Mexican equities were common. Investors were told they did not want to miss out on the growth story.
At Amundi Asset Management, the house view was at odds with the prevailing optimism regarding Mexico. The emerging markets fixed income and equities teams launched a series of internal discussions to analyze earnings of Mexican companies from a quantitative and qualitative perspective. Information flowed freely between the equity and fixed income sides of the team, including boots on the ground research and insights. Some businesses, for example, had no presence on the fixed income side, while others had no presence on the equities side.
“We had a strong view on earnings, and could not see how they were going to drive GDP growth in Mexico at the time,” says Yerlan Syzdykov, Global Head of Emerging Markets at Amundi. “In fact, we didn’t see any short-term growth. Our view may have been different if we didn’t aggregate information holistically. It was a situation where a bottom-up view helped us to formulate a top-down approach.”
In 2016, Mexico’s GDP dipped to its lowest since 2010.
A unique approach: the emerging markets continuum
Currently, many institutional investors are eyeing emerging markets as a source of long-term opportunity as they begin to adjust their investment strategies in accordance with what is perceived as the late stages of an historically long bull market. When a new cycle commences, no stone will be left unturned in the search for alpha, and emerging markets offer intriguing possibilities.
Accessing that opportunity requires deep knowledge across what Yerlan Syzdykov refers to as an “emerging markets continuum that encompasses the full asset class spectrum, regions, instruments and strategies.” That is to say, across equities, fixed income, real assets, passive and smart beta strategies, structured or multi-asset solutions.
The toolbox in the emerging markets continuum as provided by Amundi is derived from its impressive reach and resources. Whether an investor wants thematic components in a strategy, or local currencies, or distressed loans, or everything else one can possibly imagine in a genuinely holistic set of capabilities, Amundi Emerging Markets has the solution.
To unfold this holistic approach, Amundi has built a dedicated business line, supported by 23 fixed income portfolio managers, 27 equity portfolio managers, and 23 analysts – with nearly €40 billion under active management.
Combining skills on the continuum
The typical perception is that emerging markets returns are driven by a top-down approach in equities – but sometimes a bottom-up approach can have a significant influence on what is seen from a top-down perspective. “This allows you to make adjustments in your strategy,” says Syzdykov. “That’s why the number of analysts that we have within our emerging markets platform is significant. But it’s not just the sheer number, or the way we interact with each other to develop top-down views of a country – rather it’s the coming together of the dissection of research under a global head of research for emerging markets, a person who combines both credit and equity research in one. Clearly, there is underlying credit research and equity research, but we feel that it is important to combine those two under a single umbrella to make sure we have consistent and intertwined research capabilities – a combined view from both equity and fixed income sides that provides insight even if you’re an analyst on the equity side or you’re a fixed income portfolio manager. When you see the recommendations from both perspectives on the fixed income or equity side, it may inspire you to ask meaningful questions that could further enhance the process.”
In part, Syzdykov’s global team interacts so efficiently because each year they gather at an off-site in an emerging country (this year it was Greece) where they discuss internal and investment strategies for clients, but also schedule meetings with key macro policy makers as well as CEOs of various companies in the country to gain a domestic feel for the local state of play. “It’s an integral part of building relationships within our team, so that when our experts communicate with each other, there is a high level of trust and a unified pursuit of the goals of the investors who put their trust in us,” says Syzdykov.
The possibility that Amundi might simultaneously have diverse views on fixed income and equities in emerging markets is a result of that additional layer of curiosity and an additional layer of information that differentiates it from the plethora of one-sided views on emerging markets. “Macro views and policies are difficult to translate into valuations at times,” says Syzdykov. “But if you take the time to establish and share ideas and perspectives and see how that translates into effects, you immediately create a lot of interest from both equity and fixed income risk takers. That’s what shapes us at Amundi Emerging Markets.”
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The information contained in this document is deemed accurate as at August 2018. Data, opinions and estimates may be changed without notice.Amundi Asset Management, French ‘’Société par actions Simplifiée’’, SAS with a share capital of €1,086,262,605 - Portfolio management company approved by the French Financial Markets Authority (Autorité des Marchés Financiers) - under no.GP 04000036. Head office: 90, boulevard Pasteur, 75015 Paris - France. Postal address: 90, boulevard Pasteur, CS 21564, 75730 Paris Cedex 15 - France. Tel : +33 (0)1 76 33 30 30 - amundi.com - 437 574 452 RCS Paris.