Image alt tag

Error!

There was a problem contacting the server. Please try after sometime.

Sorry, we are unable to process your request.

Error!

We're sorry, but the Insights and Intelligence Tool is temporarily unavailable

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Error!

We're sorry, but the Literature Center checkout function is temporarily unavailable.

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Tracked Funds

You have 0 funds on your mutual fund watch list.

Begin by selecting funds to create a personalized watch list.

(as of 12/05/2015)

Pending Orders

You have 0 items in your cart.

Subscribe and order forms, fact sheets, presentations, and other documents that can help advisers grow their business.

A verification Email Has Been Sent

An email verification email has been sent to .
Follow the instructions to complete the email validation process.

I have not received my verification email

Check your SPAM mailbox and make sure that twelcome@lordabbett.com is allowed to send you mail.

I'm still having trouble

If you're still having trouble verifying your email address. feel free to contact us.

1-888-522-2388
clientservices@lordabbett.com


OK

We're sorry. We found no record of the email address you provided.

Register For a LordAbbett.com Account
Using Your Email Address.

  • Registered Financial Advisors gain access to:
  • Our data mining tool, Insight & Intelligence
  • Best in-class practice management content
  • Educational events, videos and podcasts.
  • The Lord Abbett Review - Subscribe now!

Registered but Having Problems?

If you believe you are registered and are having problems verifying your email address, feel free to contact us.

1-888-522-2388 clientservices@lordabbett.com

Terms & Condition

These Terms of Use ("Terms of Use") are made between the undersigned user ("you") and Lord, Abbett & Co. ("we" or "us"). They become effective on the date that you electronically execute these Terms of Use ("Effective Date").

A. You are a successful financial consultant that markets securities, including the Lord Abbett Family of Funds;

B. We have developed the Lord Abbett Intelligence System (the "Intelligence System"), a state of the art information resource that we make available to a limited community of broker/dealers through the Internet at a secure Web site (the "LAIS Site"); and

C. We wish to provide access to the Intelligence System to you as an information tool responsive to the demands of your successful business pursuant to these Terms of Use. Accordingly, you and we, intending to be legally bound, hereby agree as follows:]

1. Overview. · Scope. These Terms of Use (which we may amend from time to time) govern your use of the Intelligence System. · Revisions; Changes. We may amend these Terms of Use at any time by posting amended Terms of Use ("Amended Terms of Use") on the LAIS Site. Any Amended Terms of Use will become effective immediately upon posting. Your use of the Intelligence System after any Amended Terms of Use become effective will be deemed to constitute your acceptance of those Amended Terms of Use.We may modify or discontinue the Intelligence System at any time, temporarily or permanently, with or without notice to you. Purpose of the Intelligence System. The Intelligence System is intended to be an information resource that you may use to contribute to your business research. The Intelligence System is for broker/dealer use only; it is not to be used with the public in oral, written or electronic form. The information on the Intelligence System and LAIS Site is for your information only and is neither the tax, legal or investment advice of Lord Abbett or its third-party sources nor their recommendation to purchase or sell any security.

2. Your Privileges. · Personal Use. Your use of the Intelligence System is a nontransferable privilege granted by us to you and that we may deny, suspend or revoke at any time, with or without cause or notice. · Access to and Use of the Intelligence System. The User ID and password (together, an "Access ID") issued by us to you (as subsequently changed by you from time to time) is for your exclusive access to and use of the Intelligence System. You will: (a) be responsible for the security and use of your Access ID, (b) not disclose your Access ID to anyone and (c) not permit anyone to use your Access ID. Any access or use of the Intelligence System through the use of your Access ID will be deemed to be your actions, for which you will be responsible. · Required Technology. You must provide, at your own cost and expense, the equipment and services necessary to access and use the Intelligence System. At any time, we may change the supporting technology and services necessary to use the Intelligence System. · Availability. We make no guarantee that you will be able to access the Intelligence System at any given time or that your access will be uninterrupted, error-free or free from unauthorized security breaches.

3. Rights in Data. Our use of information collected from you will be in accordance with our Privacy Policy posted on the LAIS Site. Our compliance with our Privacy Policy will survive any termination of these Terms of Use or of your use of the Intelligence System.

4. Your Conduct in the Use of the Intelligence System. You may access, search, view and store a personal copy of the information contained on the LAIS Site for your use as a broker/dealer. Any other use by you of the Intelligence System and the information contained on the LAIS Site these Terms of Use is strictly prohibited. Without limiting the preceding sentence, you will not: · Engage in or permit any reproduction, copying, translation, modification, adaptation, creation of derivative works from, distribution, transmission, transfer, republication, compilation or decompilation, reverse engineering, display, removal or deletion of the Intelligence System, any portion thereof, or any data, content or information provided by us or any of our third-party sources in any form, media or technology now existing or hereafter developed, that is not specifically authorized under these Terms of Use.

· Remove, obscure or alter any notice, disclaimer or other disclosure affixed to or contained within the Intelligence System, including any copyright notice, trademark and other proprietary rights notices and any legal notices regarding the data, content or information provided through the Intelligence System.

· Create a hyperlink to, frame or use framing techniques to enclose any information found anywhere on the LAIS Site without our express prior written consent.

· Impersonate any person, or falsely state or otherwise misrepresent his or her affiliation with any person in connection with any use of the Intelligence System.

· Breach or attempt to breach the security of the Intelligence System or any network, servers, data, or computers or other hardware relating to or used in connection with the Intelligence System; nor (b) use or distribute through the Intelligence System software or other tools or devices designed to interfere with or compromise the privacy, security or use of the Intelligence System by others or the operations or assets of any person.

· Violate any applicable law, including, without limitation, any state federal securities laws. 5. Your Representations and Warranties. You hereby represent and warrant to us, for our benefit, as of the time of these Terms of Use and for so long as you continue to use the Intelligence System, that (a) you are, and will continue to be, in compliance with these Terms of Use and any applicable laws and (b) you are authorized to provide to us the information we collect, as described in our Privacy Policy.

6. Disclaimer of Warranties.

· General Disclaimers.

THE INTELLIGENCE SYSTEM, THE LAIS SITE AND ALL DATA, INFORMATION AND CONTENT ON THE LAIS SITE ARE PROVIDED "AS IS" AND “AS AVAILABLE” AND WITHOUT ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND. WITHOUT LIMITING THE PRECEDING SENTENCE, LORD ABBETT, ITS AFFILIATES, AGENTS, THIRD-PARTY SUPPLIERS AND LICENSORS, AND THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, DIRECTORS, OFFICERS AND SHAREHOLDERS (COLLECTIVELY, THE “LORD ABBETT GROUP”) EXPRESSLY DISCLAIM ALL WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NONINFRINGEMENT. YOU EXPRESSLY AGREE THAT YOUR USE OF THE LAIS SITE, THE INTELLIGENCE SYSTEM, AND THE DATA, INFORMATION AND CONTENT PRESENTED THERE ARE AT YOUR SOLE RISK AND THAT THE LORD ABBETT GROUP WILL NOT BE RESPONSIBLE FOR ANY (A) ERRORS OR INACCURACIES IN THE DATA, CONTENT AND INFORMATION ON THE LAIS SITE AND THE INTELLIGENCE SYSTEM OR (B) ANY TERMINATION, SUSPENSION, INTERRUPTION OF SERVICES, OR DELAYS IN THE OPERATION OF THE LAIS SITE OR THE INTELLIGENCE SYSTEM.

· Disclaimer Regarding Investment Research.

THE INTELLIGENCE SYSTEM INCORPORATES DATA, CONTENT AND INFORMATION FROM VARIOUS SOURCES THAT WE BELIEVE TO BE ACCURATE AND RELIABLE. HOWEVER, THE LORD ABBETT GROUP MAKES NO CLAIMS, REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY, TIMELINESS, COMPLETENESS OR TRUTHFULNESS OF SUCH DATA, CONTENT AND INFORMATION. YOU EXPRESSLY AGREE THAT YOU ARE RESPONSIBLE FOR INDEPENDENTLY VERIFYING YOUR INVESTMENT RESEARCH PRIOR TO FORMING YOUR INVESTMENT DECISIONS OR RENDERING INVESTMENT ADVICE. THE LORD ABBETT GROUP WILL NOT BE LIABLE FOR ANY INVESTMENT DECISION MADE BY YOU OR ANY OTHER PERSON BASED UPON THE DATA, CONTENT AND INFORMATION PROVIDED THROUGH THE INTELLIGENCE SYSTEM OR ON THE LAIS SITE.

· Survival.

THIS SECTION 6 SHALL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM..

7. Limitations on Liability.

NONE OF THE MEMBERS OF THE LORD ABBETT GROUP WILL BE LIABLE TO YOU OR ANY OTHER PERSON FOR ANY DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES (INCLUDING LOSS OF PROFITS, LOSS OF USE, TRANSACTION LOSSES, OPPORTUNITY COSTS, LOSS OF DATA, OR INTERRUPTION OF BUSINESS) RESULTING FROM, ARISING OUT OF OR IN ANY WAY RELATING TO THE INTELLIGENCE SYSTEM, THE LAIS SITE OR YOUR USE THEREOF, EVEN IF THE LORD ABBETT GROUP HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS SECTION 7 WILL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM.

8. Miscellaneous Provisions.

· Governing Law. This Agreement will governed by and construed in accordance with the laws of the State of New York, without giving effect to applicable conflicts of law principles.

THE UNIFORM COMPUTER INFORMATION TRANSACTIONS ACT OR ANY VERSION THEREOF, ADOPTED BY ANY STATE, IN ANY FORM ("UCITA") WILL NOT APPLY TO THESE TERMS OF USE. TO THE EXTENT THAT UCITA IS APPLICABLE, THE PARTIES HEREBY AGREE TO OPT OUT OF THE APPLICABILITY OF UCITA PURSUANT TO THE OPT-OUT PROVISION(S) CONTAINED THEREIN.

The Intelligence System is not intended to be used by consumers, nor are the consumer protection laws of any jurisdiction intended to apply to the Intelligence System. You agree to initiate and maintain any action, suit or proceeding relating to these Terms of Use or arising out of the use of the Intelligence System exclusively in the courts, state and federal, located in or having jurisdiction over New York County, New York.

YOU HEREBY CONSENT TO THE PERSONAL JURISDICTION AND VENUE OF THE COURTS, STATE AND FEDERAL, LOCATED IN OR HAVING JURISDICTION OVER NEW YORK COUNTY, NEW YORK. YOU AGREE THAT YOU WILL NOT OBJECT TO A PROCEEDING BROUGHT IN YOUR LOCAL JURISDICTION TO ENFORCE AN ORDER OR JUDGMENT OBTAINED IN NEW YORK.

· Relationship of Parties. The parties to these Terms of Use are independent contractors and nothing in these Terms of Use will be construed as creating an employment relationship, joint venture, partnership, agency or fiduciary relationship between the parties.

· Notice. All notices provided under these Terms of Use will be in writing and will be deemed effective: (a) when delivered personally, (b) when received by electronic delivery, (c) one business day after deposit with a commercial overnight carrier specifying next day delivery, with written verification of receipt, or (d) three business days after having been sent by registered or certified mail, return receipt requested. We will only accept notices from you in English and by conventional mail addressed to: General Counsel Lord, Abbett & Co. 90 Hudson Street Jersey City, N.J. 07302-3973 We may give you notice by conventional mail or electronic mail addressed to the last mail or electronic mail address transmitted by you to us.

· Third-Party Beneficiaries. The members of the Lord Abbett Group are third-party beneficiaries of the rights and benefits provided to us under these Terms of Use. You understand and agree that any right or benefit available to us or any member of the Lord Abbett Group hereunder will also be deemed to accrue to the benefit of, and may be exercised directly by, any member of the Lord Abbett Group to the extent applicable.

· Survival. This Section 8 will survive any termination of these Terms of Use or your use of the Intelligence System. The undersigned hereby signs these Terms of Use. By electronically signing and clicking "Accept" below, these Terms of Use will be legally binding on me. To sign these Terms of Use, confirm your full name and enter your User ID and Password (as your electronic signature) in the fields indicated below and click the “I Accept” button.

Reset Your Password

Financial Professionals*

Your password must be a minimum of characters.

Confirmation Message

Your LordAbbett.com password was successully updated. This page will be refreshed after 3 seconds.

OK

 

Fixed-Income Insights

The days of emerging-market corporate bonds being thought of as a niche asset class are, in our view, behind us.

Emerging economies have played an increasingly large role in global GDP growth. In fact, global policy makers now require Brazil, India, and China, among others, to have a seat at the table when discussing changes to the global financial architecture. This is attributable to the positive evolution of the developing world during the last 20-plus years. Many developing countries have matured significantly, moving from pegged exchange rates to floating-exchange rates, and establishing central banks that are independent of their governments and now focus on managing domestic interest, inflation, and growth rates. In addition, many have implemented fiscal discipline, accumulated significant foreign reserves, and developed functional local capital markets. In fact, economic stabilization and maturation have allowed emerging issuers to be among the first to access the capital markets coming out of the global financial crisis.

More specifically, emerging market (EM) corporate bonds allow investors to tap into the next stage of EM economic growth and development by investing in the debt of corporations that appear best positioned to take advantage of positive secular trends. For example, the resources required to support the growth in India and China, in terms of residential and commercial real estate investment, is staggering, as China adds the building-equivalent of Manhattan every two years, and India adds the equivalent of Chicago every year. Urbanization in these regions necessitate the development and expansion of infrastructure in terms of telecommunications, banking, homebuilding, power plants, railroads, port facilities, and water and electric utilities. The resources needed include steel, iron ore, copper, oil, and natural gas—each of which is sourced from various emerging countries. These trends also require large amounts of long-term capital.

While EM corporate bond issuance has a history of more than 30 years, the asset class continuously has matured over time. While many investors may still think of small, unknown regional and niche players when they hear the words “emerging markets,” they are, in fact, home to many strong global enterprises that are viewed as world leaders in their respective industries. The days of EM corporate bonds being excluded entirely from portfolios or investors viewing EM debt as a fringe asset class, acting solely to complement more mainstream assets, are, in our view, behind us. The increases in EM growth rates mentioned above, and the dampening of the volatility of those growth rates has boosted business confidence, and, ultimately, led to an increase in corporate bond issuance. According to J.P. Morgan, as Chart 1 illustrates, dollar-denominated EM corporate bonds have become an asset class difficult to ignore, growing to $1.813 trillion, from just $267 billion in 2004—a 580% increase. Since the credit crisis, the market has expanded by 200%, making it one of the fastest growing fixed-income asset classes. As it stands today, this market is now larger than the U.S. high-yield market ($1.6 trillion) and the U.S. leveraged-loan market ($1.0 trillion), as of February 28, 2017. Not only has the size of the market changed but so has it’s composition. There has been a large shift in risk perception, as emerging fixed-income markets have matured, with roughly 61% of the market now rated investment grade, at ‘BBB’ or higher, versus just 39% at the end of 2000.

 

Chart 1.  The Size and Composition of the EM Corporate Bond Asset Class Has Changed Dramatically.
Total EM corporate external bond stock
US$ in billions; data as of December 31, 2016

Source: J.P. Morgan. Data are the most recent available. Compound annual growth rate (CAGR).
For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

 

According to J.P. Morgan, as Chart 2 indicates, opportunities in this now sizeable market are spread out across 1,192 issues, 552 issuers, and 51 countries encompassing a diversified set of regions and sectors. 

 

Chart 2. EM Corporates Are Diversified Across Regions and Sectors
(As of 12/31/2016)

Source: J.P. Morgan. Based on the J.P. Morgan Corporate Emerging Markets Bond Index Broad Diversified (CEMBI BD). For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

 

Chart 3 illustrates that, on average, EM corporate debt is characterized by wider spreads relative to comparably rated U.S. corporate bonds. This additional compensation exists despite corporate issuers in developing markets employing lower leverage and experiencing lower default rates relative to their U.S. counterparts. What is more, under the methodology of credit ratings agencies, companies generally cannot be rated above their sovereign debt of their country of domicile, meaning that their current corporate ratings may not be an accurate reflection of underlying business fundamentals. Therefore, this incremental yield might be attributable to compensation for sovereign risk, not company-specific risk. 

 

Chart 3. Emerging Market Corporate Debt Historically Has Offered Wider Spreads Than Comparably Rated U.S. Corporate Bonds
Average spread by credit rating, as of February 28, 2017

Source: BofA Merrill Lynch.  U.S. corporate spread by credit quality as represented by the BofA Merrill Lynch U.S. Corporate Master Index.  EM corporate spread by credit quality as represented by the BofA Merrill Lynch High Grade Emerging Markets Corporate Plus Index. The chart is based on the option-adjusted spread for emerging market corporate bonds and U.S. corporate bonds as February 28, 2017. 
Past performance is no guarantee of future results.  For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.  Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.  Credit ratings are derived from a nationally recognized statistical rating organization such as Standard & Poor’s, Moody’s, and Fitch, as an indication of an issuer’s creditworthiness. 

 

The strong positive inflow for this asset class is another element of maturation worth noting. Historically, demand for EM corporates was derived from hedge funds and proprietary institutional trading desks. The asset class later attracted the attention of mutual fund portfolio managers, who invested in EM debt via multi-sector bond funds, and, ultimately, dedicated EM bond funds, expanding the presence of the asset class within the retail marketplace. After the financial crisis of 2008–09, institutional investors, such as sovereign wealth funds, insurance companies, and pension funds, began increasing exposure. More recently, as the global growth and commodities outlook has improved, so has the investor appetite for bonds issued from companies in the emerging markets. Year to date, investors have committed more than $3 billion to EM corporate bond funds, according to HSBC.

For the last three-year period ended February 28, 2017, EM corporate bonds not only provided attractive returns relative to other major asset classes but they also have, in most cases, done so with less risk. Considering that corporate bonds of emerging market issuers are primarily U.S. dollar denominated, it is no surprise they come with less volatility than EM sovereign bonds denominated in local currencies (as represented by the JPM EMBI Global Index) or the local currencies themselves (as represented by the JPM ELMI+ Index). Ultimately, this has led to compelling risk-adjusted excess returns (as measured by the Sharpe ratio). What is more, developing market corporates offer diversification benefits, demonstrating just a 0.25 correlation with U.S. government bonds (as represented by the Bloomberg Barclays U.S. Government Bond Index) over the last three years and a 0.45 correlation with the Bloomberg Barclays Aggregate. Over the last 12 months (ended March 23, 2017), the EM corporate bond market (as measured by the JPM CEMBI Broad Diversified Index) returned 9%. 

 

Chart 4: Historically, EM Corporate Bonds Have Offered Attractive Risk-Adjusted Returns
Trailing three years (as of 02/28/2017)

Source: Morningstar.
Past performance is no guarantee of future results.  For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.  Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment. 

 

What about the Impact of Rate Hikes?
While consensus typically has been that a tightening monetary policy in the United States is a headwind to emerging market bonds, the tone of the U.S. Federal Reserve’s (Fed) recent rate hike announcement on March 15 has actually eased concerns regarding the potential for hawkish policy in 2017. Indeed, on March 15, the date of the most recent increase in the fed funds target rate, the JPM CEMBI Index rose, and was up 56 basis points for the week ended March 22.

Some may argue that investors are looking past historical trends and are putting a greater emphasis on company fundamentals, allowing EM corporate performance to detach from its typical expected reaction to U.S. policy changes, at least modest ones. A rise in commodity prices stemming from signs of a global economic recovery with the potential for greater infrastructure spending in the United States may have pulled developing market performance off its normal course during this gradual Fed tightening cycle.

Conclusion
U.S. dollar-denominated emerging market corporate bonds recently offered attractive relative yields, portfolio-diversification benefits, and compelling risk-adjusted excess returns. Although spreads have narrowed in recent months, in our opinion, there is reason to be optimistic about the asset class, particularly as the outlook for overall global growth, emerging market growth rates, and commodity prices has improved. 

 

RELATED TOPICS

ABOUT THE AUTHOR

RELATED FUND
The Lord Abbett Emerging Markets Corporate Debt mutual fund seeks to deliver current income and long-term growth of capital. View portfolio and more.

Please confirm your literature shipping address

Please review the address information below and make any necessary changes.

All literature orders will be shipped to the address that you enter below. This information can be edited at any time.

Current Literature Shipping Address

* Required field