In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they'd never buy.
This week our interviewee is Polina Kurdyavko, head of emerging markets and senior portfolio manager at BlueBay Asset Management, where she manages the RBC BlueBay Emerging Market Debt Fund.
Which Sector Shows the Biggest Promise in 2022?
Within emerging market debt, the price action on YTD basis has been almost indiscriminately harsh. The emerging market hard currency sovereign index is down nearly -16% since the beginning of the year, while EM local currency index has performed marginally better at around -12%. EM corporate debt, as often is the case, held up better than its sovereign counterpart, delivering a -12.4% return. (All data as of 15th August YTD returns).
What's the Biggest Economic Risk Today?
The biggest economic risk today remains the risk of stagflation. Although showing initial signs of moderation, inflation could yet prove to be sticky, putting further pressure on the rates curve. This, in return, could put a dampening impact on growth, which could become a difficult balancing act for monetary policy and fiscal policy alike.
Describe Your Investment Strategy
When it comes to portfolio construction, country weightings and corporate/quasi-sovereign investment opportunities are determined entirely by our research, forecasts and views on what we believe to be the correct level to hold as an absolute amount in the portfolio. Liquidity and technical analysis is also crucial component of our position sizing methodology.
Which Famous Investor Do You Admire?
There is no particular name that comes to mind, but overall I admire investors and policy makers/senior managers that are driven by integrity and not afraid to break conventions.
Name Your Favourite "Forever Stock"
While we cannot name specific stocks, our favorite types of stocks are those that are quasi sovereign and strongly supported by the sovereign. These opportunities are generally relatively liquid assets and can offer an attractive spread premium over the sovereign.
What Would You Never Invest In?
As a policy, we would not invest in an asset deemed to be “very high risk” from an ESG perspective and where we have been unsuccessful in engagement, and therefore unable to judge if the issuer is working to improve its ESG trajectory.
Growth or Value?
BlueBay specialises in fixed income, so we prefer fixed income investments over growth and value stocks.
House or Pension?
Where RBC GAM supports many institutional investors, pensions would be our preference.
What Are Your Thoughts on Crypto?
Despite the progress and growth we have seen in recent years, it is still relatively early days for cryptocurrency and blockchain. While the future is not clear, it’s becoming increasingly apparent that the underlying technology offers many benefits. In fact, many large public companies are exploring uses for blockchain technology. These innovations may offer investors another way to participate in the cryptocurrency arena.
How Can We Increase Diversity in Fund Management?
RBC BlueBay’s vision is to be among the most inclusive and successful companies in the world. To do this, we know that we have to look both internally, as well as exercise our influence externally to push for positive change. An example of what we’ve been involved in to improve diversity, equity and inclusion within the investment industry is how we often host events which raise awareness around Diversity Equity & Inclusion issues, including International Day of Pink and International Women’s Day (IWD). Additionally, one of our charity partners is EMpower, which is focused on solutions that support marginalised youth in emerging market countries. For International Women’s Day we have raised over £1400 to support their efforts since we first partnered with them.
Have You Ever Engaged With a Company and Been Particularly Proud (or Disappointed) in the Outcome?
One of our more successful engagements have been on Brazil deforestation. In June 2020, we were invited to join with other investors to write to the government of Brazil and express our concern over the rising pace of deforestation in the Amazon and other parts of the country. We helped to fine tune the content, highlighting why we see forest loss as a material risk to the investment thesis for Brazilian fixed income assets, and making sure that the embassy in London was one of the points of contact for the finished letter.
In response, we worked with Storebrand Asset Management from Norway, who were the driving (IPDD) force behind the original letter, to formalise the group as the Investor Policy Dialogue on Deforestation. We settled on a governance structure and terms of reference, and accepted the invitation to co-chair this new collaborative engagement initiative. The IPDD has since grown to include 57 financial institutions from 18 countries (including Brazil – it’s particularly important to counter accusations that we were ‘meddling foreigners’ undermining national sovereignty) with approximately $7.2 trillion in assets under management (as of Jan 2022).
What's The Best Bit of Advice You’ve Ever Been Given?
Don’t be afraid to ask questions and don’t take “no” for an answer.
What Would You be if You Weren’t a Fund Manager?
Philanthropist.
