2014

Neuberger Berman Emerging Markets Debt Team Sees Moderate Economic Growth, Relative Value in 2014 for EM Markets

NEW YORK, Aug. 19, 2013 /PRNewswire/ -- Emerging markets debt (EMD) portfolio managers and strategists at Neuberger Berman, one of the world's leading employee-controlled money managers, say that contrary to some recent market views, they believe growth in emerging markets economies is likely to improve and the financing needs of sovereign and corporate issuers are relatively moderate, potentially limiting supply, supporting credit fundamentals and spreads, and providing a constructive environment for bonds. The EMD team's outlook for their sector in 2013 and beyond is available at https://www.nb.com/campaigns/emd/home_us.html.

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While the team's outlook is cautious for the second half of 2013, Neuberger Berman's EMD managers and strategists anticipate that overall emerging market (EM) economies could achieve growth of over 5% this year – after first-half growth of 4.8% and 2012 growth of 5.2%. In 2014, the team believes that EM economic growth could exceed 6%.

"We believe that investors have made too much of slowing growth in emerging markets," said Rob Drijkoningen, co-head of the Neuberger Berman EMD team. Gorky Urquieta, co-head, adds "We expect some economic resurgence, supported by global recovery, particularly in the developed markets, which should partially offset China's slowdown, even as EM policymakers gradually scale back monetary support."

Overall, EMD's recent underperformance relative to U.S. spread products and European peripheral sovereigns has improved the relative value of emerging markets debt, according to the Neuberger Berman team, which believes sovereign credit spreads are attractive compared with historical levels and current expected default rates. Corporate debt should largely mirror sovereign performance, but carry some risk due to recent outperformance over sovereigns.

Within the EM corporate sector, high yield issues offer an additional spread cushion in the event of a U.S. Treasury sell-off, according to the Neuberger Berman team. Local currency debt is the EMD team's preferred market segment through year-end 2013. Real rates have become more positive as inflation and inflation expectations remain contained, and EM central banks are mostly neutral to accommodative, which should limit risk from U.S. interest rates. While below-potential growth is likely to be beneficial for EM local bonds, monetary shifts between EM and the U.S. and commodity weakness may hamper the currencies in which such debt has been issued.

"We believe the structural case for EMD remains strong, as investors increasingly recognize the economic significance, improved credit quality, and depth of EM economies and markets," said Urquieta. "EMD should continue to benefit from the long-term trend of inflows, as fixed income investors add exposure to emerging markets, which are structurally underrepresented in their portfolios," said Drijkoningen.

Earlier this year, 22 EMD investment professionals joined Neuberger Berman to provide investment capabilities spanning hard and local currency mandates, as well as EMD corporate bond and dedicated Asian debt strategies. The investment staff, which includes 12 portfolio managers, six credit analysts and four economists and strategists, operates from offices in the US, Europe and Asia, providing dedicated regional expertise and around-the-clock market coverage. While at a previous investment management firm, team members managed over US$16 billion in EMD assets.

About Neuberger Berman

Neuberger Berman is a private, independent, employee-controlled investment manager. It partners with institutions, advisors and individuals throughout the world to customize solutions that address their needs for income, growth and capital preservation. With more than 400 professionals focused exclusively on asset management, it offers an investment culture of independent thinking.  Founded in 1939, the company provides solutions across equities, fixed income, hedge funds and private equity, and had $214 billion in assets under management as of June 30, 2013. For more information, please visit our website at www.nb.com.

DISCLAIMER
This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Neuberger Berman products and services may not be eligible for sale in some jurisdictions and they may not be suitable for all client types.

Investments in emerging markets entail risks which include the possibility of political or social instability, adverse changes in investment or exchange control regulations, expropriation and withholding of dividends at source. In addition, such securities may trade with less frequency and volume than securities of companies and governments of developed, stable jurisdictions. There is also a possibility that effective redemption of shares following an investor's redemption request may be delayed due to the potential illiquid nature of the assets. The legal infrastructure and accounting, auditing and reporting standards in Emerging Market Countries in which a Portfolio may invest may not provide the same degree of information to investors as would generally apply in developed countries. In particular, valuation of assets, depreciation, exchange differences, deferred taxation, contingent liabilities and consolidation may be treated differently from international accounting standards.

This material has been issued for use by the following entities; in the U.S. and Canada by Neuberger Berman LLC, a U.S. registered investment advisor and broker-dealer and member FINRA/SIPC; in Europe, Latin America and the Middle East by Neuberger Berman Europe Limited, which is authorised and regulated by the UK Financial Conduct Authority and is registered in England and Wales, Lansdowne House, 57 Berkeley Square, London, W1J 6ER; in Australia by Neuberger Berman Australia Pty Ltd (ACN 146 033 801, AFS Licence No. 391401), which is licensed and regulated by the Australian Securities and Investments Commission to deal in, and to provide financial product advice for, certain financial products to wholesale clients; in Hong Kong by Neuberger Berman Asia Limited, which is licensed and regulated by the Hong Kong Securities and Futures Commission; in Singapore by Neuberger Berman Singapore Pte. Limited (Company No. 200821844K), which currently operates under an exemption from licensing under the Financial Advisers Act (Chapter 110) of Singapore for marketing of collective investment schemes to institutional investors; in Taiwan to specific professional investors or financial institutions for internal use only by Neuberger Berman Taiwan Limited, which is licensed and regulated by the Financial Services Commission ("FSC") and a separate entity and independently operated business, with FSC operating license no.:(102) FSC SICE no.011, and address at: 10F, No. 1, Songzhi Road, Taipei, Telephone number: (02) 87268280; and in Japan and Korea by Neuberger Berman East Asia Limited, which is authorized and regulated by the Financial Services Agency of Japan and the Financial Services Commission of Republic of Korea, respectively (please visit https://www.nb.com/Japan/risk.html for additional disclosure items required under the Financial Instruments and Exchange Act of Japan). Except for the foregoing, this material is not intended for use or distribution within or aimed at the residents of any other country or jurisdiction. This document is not an advertisement and is not intended for public use or additional distribution in the following jurisdictions: Brunei, Thailand, Malaysia and China.

The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman Group LLC.

© 2013 Neuberger Berman LLC. All rights reserved.

Media Contact:
Alexander Samuelson, 212 476 5392, Alexander.Samuelson@nb.com
Anji Stewart, 00 44 (0)20 3214 9013, Anji.Stewart@nb.com

SOURCE Neuberger Berman



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