Polina Kurdyavko, Head of Emerging Markets, Senior Portfolio Manager, BlueBay Asset Management, discusses her outlook on emerging markets and weighs in on how advisors can navigate today’s investment challenges and geopolitical risks.
The current investment environment poses nuanced challenges for investors. With high commodity prices, high inflation, low growth, and all-around high risk, Kurdyavko asserts that investment choices have become about choosing the least risky proposition. Sometimes the correct choice is not to invest. “Often for investors, we find it very difficult not to invest. But in this case, we found that not investing at all in that region was warranted, and we maintain that stance, given the implication on liquidity, final valuations, and really, the lack of clarity on what could be the resolution of the conflict,” says Kurdyavko on the ongoing Ukraine-Russia war.
Kurdyavko discusses how investors can leverage the consequences of the Ukraine-Russia war to see positive results in their portfolios. “From the perspective of emerging markets, there are a number of tailwinds that we feel could contribute to positive relative performance of this asset class,” says Kurdyavko.
For instance, due to the Ukraine-Russia war, commodity prices have surged. The high prices of commodities, which typically represent risk of high inflation and low growth, may actually be positive in emerging markets. ⅔ of emerging countries are commodity exporters, so elevated commodity prices will actually help current account balances and ease fiscal pressures. By providing an opportunity for growth in an otherwise volatile market, this increases the attractiveness of investing in emerging markets.
Kurdyavko asserts that though the pandemic and the Ukraine-Russia war has slowed down globalization, globalization hasn’t and won’t slow to a stop. Globalization is more about manufacturing and services than raw materials, so though Russia may provide those raw materials, its contribution to global trade flow has always been minimal, and that will continue to be the case.
Born in the Soviet Union, Kurdyavko became interested in economics and finance at a young age, when she realized the importance of preserving savings after watching her family lose their savings. This experience sparked her interest in emerging market fixed income investing. Kurdyavko has been a partner at BlueBay Asset Management since 2005. BlueBay Asset Management is the specialist fixed income manager of the Royal Bank of Canada’s multi-billion dollar Global Asset Management business (RBC GAM). BlueBay is a fixed income specialist which embodies the best management of alternative and traditional asset management. Headquartered in London, BlueBay invests over $120 billion for institutional investors and financial institutions.
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