Practical analysis for investment professionals
21 May 2013

New Era for Global Bonds: Everything You Know Is Wrong

Posted In: Economics, Fixed Income

It is a new era for global bonds and everything you know is wrong, PIMCO’s global co-head of emerging markets portfolio management, Ramin Toloui, told delegates at the 66th CFA Institute Annual Conference in Singapore.

His point? All of the important market structures and ways of thinking about investing were put in place over the last many decades. But this environment was largely unswerving in its reverence for developed markets. In addition, it had very little of that most irritating of investor perturbances: volatility. As a result, fixed-income investors are all fighting the last war with the same strategies and the same weapons.

So what has changed? For starters, Toloui noted, there’s been a transformation of international creditor-debtor relationships. Consider:

  • Emerging markets now have positive current account balances, meaning that they now raise capital domestically.
  • Emerging market international reserves are now approaching $8 trillion.
  • In five years, the gross government debt-to-GDP ratios of the G20 nations have risen from 80% to around 120%. Over this same time period, the comparable stats for emerging markets are largely flat, with a government debt-to-GDP ratio of around 30%.
  • Underemployment and unemployment plague first-world economies and a full jobs recovery has yet to occur post the Great Recession.
  • Emerging markets represented virtually all of global growth in 2012, yet they only receive a 5% allocation in most global bond portfolios!

Read more on the 66th CFA Institute Annual Conference blog

About the Author(s)
Jason Voss, CFA

Jason Voss, CFA, tirelessly focuses on improving the ability of investors to better serve end clients. He is the author of the Foreword Reviews Business Book of the Year Finalist, The Intuitive Investor and the CEO of Active Investment Management (AIM) Consulting. Voss also sub-contracts for the well known firm, Focus Consulting Group. Previously, he was a portfolio manager at Davis Selected Advisers, L.P., where he co-managed the Davis Appreciation and Income Fund to noteworthy returns. Voss holds a BA in economics and an MBA in finance and accounting from the University of Colorado.

Ethics Statement

My statement of ethics is very simple, really: I treat others as I would like to be treated. In my opinion, all systems of ethics distill to this simple statement. If you believe I have deviated from this standard, I would love to hear from you: jason@jasonapollovoss.com

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