Wouter Van Overfelt: «Defaults Are Overestimated»

Emerging market bonds are seen as risky by investors as they are concerned about losing their investment. Wouter Van Overfelt, senior portfolio manager at Vontobel, tells finews-TV why he still thinks they are a good bet.

At the end of last year, investors thought that the rate hikes in the U.S. would cause an economic slowdown. They took fright and sold off their assets, causing markets to plunge. This year, the mood swung back and prices surged again.

Wouter Van Overfelt, a senior portfolio manager for emerging market bonds at Vontobel, told «finews-TV» that returns had been quite positive this year: «Overall the run has been very good since the beginning of the year.»

Still, some investors believe that emerging market bonds are more risky than similar securities issued in the industrialized world. Van Overfelt believes that it is important to distinguish between corporate and sovereign bonds. Corporate bonds are less risky than sovereign bonds because the companies that emit bonds for the international market on average are very large and important for their country's economies.

Climate Debate Has Reached Emerging Markets

Given the importance, the defaulting company usually gets a bail-out either from the country or investor families. Also, companies and investors are interested in finding a negotiated solution, which means that a total loss is very unlikely. The climate debate has also reached emerging markets and green bonds have been made available in such countries too. Examples for this are bonds released by wind and solar energy companies.