The total size of the US high-yield market is $1 trillion. (Getty)
Emerging Markets- A Strong Case
GSAM is also very bullish on emerging markets for issuances in hard currency (US dollars) and local currency, said Briscoe. The latter is growing particularly quickly, he added.
“The size of local emerging market debt is $1.5 trillion – larger than the US high yield market which stands at $1 trillion and about three times the size of the external emerging markets universe.
“Emerging market countries can now issue in local currency because they are a more attractive investment opportunity – they have enjoyed periods of macro-economic stability and their balance sheets are stronger. They are also being upgraded in the investment grade, which is reflective of the fundamental improvement in those issuers.
“And the fact that they are issuing in local currencies is a sign of confidence that the market has in those issuers, and clearly its better because they are not running a currency mismatch between the debt they issue and their local liabilities,” he added.
Middle East investors have traditionally leaned towards opportunities in developed countries, but that has begun to change.
“They [local investors] are sophisticated enough to realise that there are attractive opportunities in emerging world that are relatively more attractive than the developed world. And I think the European crisis has put that into the spotlight,” said Briscoe.
With regards to the Middle East market, GSAM does allocate to some local issuers, both sovereign and quasi-sovereign/corporate.
“The debt capital markets in the region are still developing. For large asset managers like us, we think about liquidity and tradability of debt and these are things that will improve and evolve over time.
“These are markets that we continue to monitor for attractive investment opportunities and they will develop in the same way that other emerging debt markets are developing,” he added.