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Kicking ahead in EM credit: Pictet chief’s winning formation

Pictet’s Alain Defise talks tactics for making the most of the emerging world.

Alain Defise, head of EM corporates at Pictet Asset Management, believes the best opportunities in developing world company debt can be achieved through a fruitful combination of ideas.

Here, in an extract from his end of year outlook, entitled ‘An oasis in uncertain times’, Defise turns football coach and reveals his potentially match-winning tactics for the asset class.

In our line-up, the defence - or the anchor for the portfolio - features, among others, non-cyclical companies, such as a Saudi utility whose creditworthiness and ability to generate steady cashflow should remain strong even at times of economic downturns. The midfield is made up of issuers that offer greater capital appreciation potential over the medium term, and includes consumer and mining firms.

Finally, our strikers are our more ambitious holdings with the greatest potential over the long run but also a bit more risk. Here, we particularly like Nigerian financial companies. They have a long track record of bond issuance, attractive fundamentals and resilience to oil price fluctuations that could affect other parts of the Nigerian debt market.

Over the past five years, the emerging credit market has grown, diversified and matured. It has also proved its ability to deliver attractive levels of income alongside capital gains. With the right line-up of investments, we believe the potential for the next five years could be even greater.

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