A large reason for this belief, he told Portfolio Adviser, is the ability to issue debt.
“As a bond buyer, one needs to ask, where will I be able to lend money and do so at reasonably attractive rates?” he said, pointing out that the developed world is overlevered.
“The capacity for most European economies, the Japanese and US economies to continue to borrow at the sovereign credit level is compromised,” Tank explained, adding that many of these countries are on the wrong side of the demographic curve and maintain high debt-to-GDP ratios.
By contrast, Tank pointed out, this year around two thirds of the world’s growth is coming from the developing world. It is, he admits, growing more slowly than it was, but it is growing meaningfully faster than the developed world.
And, he added, the profile of the debt on offer has improved dramatically in the years following the Asian debt crisis of the late 1990s.
“The ability to borrow through time in the developing world is simply a function of growth rates, as long as those growth rates remain high and their balance sheets remain pretty good that is where the debt is going to be created,” he said.
And, while he admitted that there will be a volatility premium attached because it will be created in places that are more volatile, where the economy is less diversified, there remains a good case for that investment.
“It is an entry point issue and, with any of these things, you want to invest when it is dark,” he added.
