24/11/2011
By Ilonka Oudenampsen
Emerging markets and US credit could perform well during 2012, according to Raymond Sagayam, manager of the Pictet Total Return-Kosmos Fund.
Pictet believes there is a great deal of value in credit but warns that the market can remain irrational for longer than makes sense, meaning that even greater attention is needed to balance the long risk and short risk side of the equation.
Sagayam said that the geographical credit allocation within the investment grade space is therefore key. “Recent economic data in the United States are encouraging and subject to a resolution on the Supercommittee budgetary cuts, we are likely to selectively increase our long exposure from current levels.
“With regards to Europe, we are likely to remain short risk on European cyclicals until a clear Eurozone solution materialises in the form of an ECB backstop or more clarity on a proposed Eurobond solution. We believe the Itraxx Index is an ‘overused’ hedge and there is better alpha to be generated by picking individual ideas.”
Emerging markets are to a large extend dependent on China, said Sagayam, and as long as Chinese growth does not slow down dramatically, staying in a range of 8-9 per cent as a minimum, and liabilities on the banking side are kept under control, emerging market debt has a good chance of outperforming in 2012.
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