Esther Law, senior portfolio manager, emerging markets sovereign and responsible investing lead at Amundi Asset Management, discusses discipline, diversification, high-quality research and why ESG is fully integrated into the investment process.
The Monday Manager series covers fund managers that have worked on their fund for over three years, and where fund assets are over £100m.
Can you explain your fund’s approach to investment and what it is trying to achieve for investors?
We take an active, research-backed and valuation-driven approach combining top-down macro views with bottom-up issuer selection to identify opportunities across the entire emerging marker debt (EMD) universe. Our objective is to deliver attractive risk-adjusted returns, with a strong focus on income, consistency and capital preservation while managing drawdown and liquidity carefully.
ESG is fully integrated into the process, and we aim to improve the portfolio’s ESG profile versus the broader universe where possible. We see EMD playing a larger role in global fixed income and contributing meaningfully to global growth, with improving fundamentals.
Emerging markets benefit from stronger balance sheets, more contained external debt and greater policy orthodoxy, combined with the re-rating of the asset class – as more than 70% of countries have been upgraded in the last five years.
Which sectors and regions in the world of EMD are you most excited about right now, and which are you avoiding?
We remain constructive but selective. Regionally, we favour Latin America and selected frontier markets where valuations remain attractive and many countries benefit from higher real yields, commodity exposure and improving external balances.
We are also positive on markets with credible policy frameworks and reform momentum. In hard currency, we prefer high yield over investment grade, as high yield offers better carry and more valuation upside in the current regime.
At the country level, Mexico, Argentina, Brazil and parts of Africa remain interesting, while in EM local markets we like Brazil, Hungary and South Africa. In EM corporates, energy and technology continue to stand out.
By contrast, we are more cautious on Asia and the Middle East, where spreads are tighter and compensation is less compelling. We also avoid areas where valuations are stretched or macro and political risks are not adequately priced.
What is the fund’s average rating and duration at the moment? Has this changed over recent months and, if so, why?
The average rating of our EM Blended fund centres around BB with a duration of four years. The credit rating has been broadly stable as we have been holding fire while monitoring the geopolitical development in the Middle East carefully at the time when EM credit has remained very resilient, as has our assets under management.
We have been reducing duration in the US with the anticipation that cuts being postponed by the Federal Reserves as well as some local currency bond positions on the back of higher inflation due to higher oil prices.
What are the biggest headwinds EMD investors have to contend with at the moment? How are you navigating these?
The biggest headwinds impacting all risk assets include persistent inflation pressure, uneven growth, geopolitical uncertainty and energy price volatility. While our base case is still for EM growth to outperform developed markets, the environment could be more fragile and differentiated across countries. Geopolitics remains especially important.
Periods of de-escalation have supported relief rallies, but the risk of renewed volatility is still elevated. We navigate this by staying agile, maintaining portfolio liquidity, avoiding value traps and using hedges where appropriate.
We are selective at both country and issuer level, preferring markets with stronger policy credibility, better external buffers, reform potential and attractive carry. Political risk is managed explicitly through our research process, including dedicated geopolitical analysis.
What are the benefits of investing in EMD at the moment, relative to other fixed income asset classes?
EMD continues to offer attractive income, diversification and better relative value relative to traditional fixed income segments. Yield levels remain elevated, real rates are attractive in several local markets and many EM sovereigns and corporates now have stronger balance sheets than in prior cycles.
The asset class offers meaningful diversification away from US-centric risks at a time when US fiscal and macro uncertainty is increasing. Foreign ownership of EM debt remains low, which creates a positive technical backdrop, while flows into EM bond funds are now turning positive have after a few negative years.
The combination of stronger fundamentals, higher carry, cleaner positioning and more differentiated return drivers makes EMD look more like a core allocation than a satellite one for many investors. The ratio of credit rating upgrades of EM countries versus downgrades year-to-date is also impressive over 75% as at June 2026, suggesting the credit quality is also improving for EMD as an asset class.
What is the best piece of investment advice you have ever been given?
Well researched trade ideas with diversified quality carry and disciplines to generate consistent risk-adjusted returns.
