Why consider active emerging market bond strategies?

Emerging market debt delivered double-digit returns in 2023, driven in part by a shortage of new issuance supply. A recent wave of new EM debt issuance has helped widen spreads and is providing a near-term opportunity for active investors to add exposure ‒ but security selection is critical, says Daniel Shaykevich, senior portfolio manager of emerging market bonds, Vanguard. Meanwhile, EM debt is uniquely poised to benefit from prospective rate cuts and strong ongoing demand for fixed income assets in the coming months, which Vanguard believes will drive EM outperformance in 2024.