October 22, 2025 | Emerging Markets Debt
Portfolio Manager
View Fund:
https://im.williamblair.com/investments/sicav-funds/lu2093691256-emerging-markets-debt-hard-currency-fund
View Strategy:
https://im.williamblair.com/investments/separate-accounts/emerging-markets-debt-hard-currency
Want the latest insights on the economy and other forces shaping the investment landscape?
Subscribe to our Investing Insights newsletter.
EM debt continued to deliver in the third quarter of 2025, supported by resilient fundamentals and steady investor demand. Equities and gold hit record highs, and U.S. Treasury yields fell on expectations that the U.S. Federal Reserve would begin cutting rates in September. Against this backdrop, the J.P. Morgan EMBI Global Diversified Index returned 4.75%, driven by spread tightening and carry, with high-yield debt once again outperforming investment grade debt.
While policy and geopolitical risks persist, we believe many countries are better positioned to absorb trade shocks and attract funding. And with spreads near historical lows but yields still elevated, we believe the asset class continues to offer compelling opportunities—particularly in high-yield and select frontier markets.
Below, we break down some of our largest active hard-currency positions by beta bucket, which is how we allocate our risk budget.
To achieve an efficient deployment of our risk budget, we divide the investable EM debt universe into three risk buckets—high-beta countries, medium-beta countries, and low-beta countries.
Source: William Blair, as of September 2025. Beta buckets are based on the team’s qualitative and quantitative analysis. Risk buckets are provided for illustrative purposes only and are not intended as investment advice or as projections of future returns. Overweights/underweights may vary between vehicles.
The largest overweight positions on a spread duration basis were in Ukraine, Zambia, and Senegal. Conversely, the largest underweight positions were in Kenya, Nigeria, and Ivory Coast.
Ukraine (overweight): We see potential for conflict negotiations, multilateral support, and a more optimistic growth outlook. We express this view through an overweight to warrants, but recently reduced our allocation to the A bonds based on valuations—that is, to raise the beta in case of misplaced pessimism in the conflict resolution.
Zambia (overweight): We are overweight after exchanging into two performing bonds following the country’s debt restructuring, including one with likely coupon step-ups within a year. As drought effects fade and copper mine investment rises, we believe Zambia’s fundamental outlook is good.
Senegal (overweight): Despite volatility after revelations of higher-than-expected debt, we remain overweight given expected International Monetary Fund support and the government’s strong commitment to fiscal consolidation.
Polls have been a poor indicator of Ivory Coast election results in recent years, and past post-election tensions and already tight spreads keep us cautious.
Kenya (underweight): We hold a small underweight due to skepticism over the fiscal outlook despite new UAE funding. Efforts to reduce borrowing have met resistance, and further tax hikes or spending cuts appear politically difficult. Further cuts in expenditure are also likely to prove challenging, drawing into question the current macroeconomic plan that is in place under an IMF reform package. The credibility of this administration depends on narrowing the deficit and improving revenue collection as public discontent rises ahead of the 2027 elections.
Nigeria (underweight): Though we are neutral sovereign credit, we maintain a small cash underweight amid tight valuations. While exchange rate and monetary reforms and the launch of the Dangote refinery mark progress, structural challenges persist. Recent oil price volatility also poses risks to government revenues.
Ivory Coast (underweight): With presidential elections at the end of October, we remain cautious. While the incumbent is favored to win, polls have been a poor indicator of election results in recent years, and past post-election tensions and already tight spreads keep us cautious.
The largest overweight positions on a spread duration basis were in Mexico, Brazil, and Trinidad and Tobago. Conversely, the largest underweight positions were in Bahrain, Dominican Republic, and Panama.
Mexico (overweight): We remain overweight Pemex, supported by strong sovereign backing and attractive relative valuations. We are also overweight the sovereign itself on valuation grounds and maintain select corporate positions.
Brazil (overweight): We recently added corporate exposure, seeing better value after strong sovereign performance earlier in the year. Positions include oil and gas names—both independent producers and issuers linked to Petrobras—as well as an environmental services company.
Trinidad and Tobago (overweight): We find valuations attractive relative to peers. While fundamentals are softening, the country’s strong starting position and sizable Heritage and Stabilization Fund provide solid support.
We reduced our exposure to Panama following an impressive rally in August.
Bahrain (underweight): Concerns include growing volatility in regional geopolitics, the country’s relatively weak fiscal-reform efforts, lower oil prices, and tight valuations. The new issue in September also contributed to increasing supply in the region.
Dominican Republic (underweight): Fundamentals remain strong for the region, but we see little value versus peers.
Panama (underweight): We reduced our exposure following an impressive rally in August. We believe the country’s risk/reward profile is less attractive, as we think there remains a reasonably high probability of a downgrade.
The largest overweight positions on a spread duration basis were in Paraguay, United Arab Emirates, and Oman. Conversely, the largest underweight positions were in Malaysia, China, and Chile.
Paraguay (overweight): Valuations appear attractive versus low-beta peers and fundamentals seem solid. The country’s ratio of debt to gross domestic product remains low, and it has a strong history of low fiscal deficits.
United Arab Emirates (overweight): Our overweight position is driven predominantly by a combination of corporates and the smaller emirates, where we believe valuations are attractive relative to Abu Dhabi.
As oil prices have fallen, Oman stands out as a defensive play.
Oman (overweight): We believe the country’s fundamental credit improvement story remains firmly intact. As oil prices have fallen, Oman stands out as a defensive play in the region to further energy price volatility given its firm commitment to fiscal discipline and debt reduction.
Malaysia (underweight): We are underweight sovereign bonds as a result of tight valuations. We hold selective overweight exposure in quasi-sovereign bonds on more attractive valuations relative to the sovereign bonds in the index.
China (underweight): Valuations are tight and regulatory risks are unpredictable for Chinese state-owned entities. Based on a bottom-up analysis, we hold selective corporate bonds at what we believe are attractive valuations and positive credit trajectories.
Chile (underweight): We find better value in other low-beta credits. Although we do not expect the November elections to be impactful in terms of credit spreads, we believe there is the tail risk of a negative surprise.
Marco Ruijer, CFA, is a portfolio manager on William Blair’s emerging markets debt team.
Any investment or strategy mentioned herein may not be appropriate for every investor. There can be no assurance that investment objectives will be met. Products and services listed are available only to residents of this jurisdiction and may only be available to certain categories of investors. The information on this website does not constitute an offer for products or services, or a solicitation of an offer to any persons outside of this jurisdiction who are prohibited from receiving such information under applicable laws and regulations. Nothing on this webpage should be construed as advice and is therefore not a recommendation to buy or sell shares.
Please carefully consider the William Blair Funds’ investment objectives, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus and summary prospectus, which you may obtain by calling 1-800-742-7272. Read the prospectus and summary prospectus carefully before investing. Investing includes the risk of loss.
The William Blair Funds are distributed by William Blair & Company, L.L.C., member FINRA/SIPC.
The William Blair SICAV is a Luxembourg investment company with variable capital registered with the Commission de Surveillance du Secteur Financier (“CSSF”) which qualifies as an undertaking for collective investment in transferable securities (“UCITS”). The Management Company of the SICAV has appointed William Blair Investment Management, LLC as the investment manager for the fund.
Please carefully consider the investment objectives, risks, charges, and expenses of the William Blair SICAV. This and other important information is contained in the prospectus and Key Investor Information Document (KIID). Read these documents carefully before investing. The information contained on this website is not a substitute for those documents or for professional external advice.
Information and opinions expressed are those of the authors and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC, or affiliates. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Information is current as of the date appearing in this material only and subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. This material may include estimates, outlooks, projections, and other forward-looking statements. Due to a variety of factors, actual events may differ significantly from those presented.
Investing involves risks, including the possible loss of principal. Equity securities may decline in value due to both real and perceived general market, economic, and industry conditions. The securities of smaller companies may be more volatile and less liquid than securities of larger companies. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks. These risks may be enhanced in emerging markets and frontier markets. Investing in the bond market is subject to certain risks including market, interest rate, issuer, credit, and inflation risk. High-yield, lower-rated, securities involve greater risk than higher-rated securities. Different investment styles may shift in and out of favor depending on market conditions. Diversification does not ensure against loss.
Past performance is not indicative of future returns. References to specific companies are for illustrative purposes only and should not be construed as investment advice or a recommendation to buy or sell any security.
William Blair Investment Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission.
Issued in the United Kingdom by William Blair International, Ltd., authorized and regulated by the Financial Conduct Authority (FCA), and is only directed at and is only made available to persons falling within articles 19, 38, 47, and 49 of the Financial Services and Markets Act of 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons").
Issued in the European Economic Area (EEA) by William Blair B.V., authorized and supervised by the Dutch Authority for the Financial Markets (AFM) under license number 14006134 and also supervised by the Dutch Central Bank (DNB), registered at the Dutch Chamber of Commerce under number 82375682 and has its statutory seat in Amsterdam, the Netherlands. This material is only intended for eligible counterparties and professional clients.
Issued in Switzerland by William Blair Investment Services (Zurich) GmbH, Talstrasse 65, 8001 Zurich, Switzerland ("WBIS"). WBIS is engaged in the offering of collective investment schemes and renders further, non-regulated services in the financial sector. WBIS is affiliated with FINOS Finanzomubdsstelle Schweiz, a recognized ombudsman office where clients may initiate mediation proceedings pursuant to articles 74 et seq. of the Swiss Financial Services Act ("FinSA"). The client advisers of WBIS are registered with regservices.ch by BX Swiss AG, a client adviser registration body authorized by the Swiss Financial Market Supervisory Authority ("FINMA"). WBIS is not supervised by FINMA or any other supervisory authority or self-regulatory organization. This material is only intended for institutional and professional clients pursuant to article 4(3) to (5) FinSA.
Issued in Australia by William Blair Investment Management, LLC (“William Blair”), which is exempt from the requirement to hold an Australian financial services license under Australia's Corporations Act 2001 (Cth). William Blair is registered as an investment advisor with the U.S. Securities and Exchange Commission (“SEC”) and regulated by the SEC under the U.S. Investment Advisers Act of 1940, which differs from Australian laws. This material is intended only for wholesale clients.
Issued in Singapore by William Blair International (Singapore) Pte. Ltd. (Registration Number 201943312R), which is regulated by the Monetary Authority of Singapore under a Capital Markets Services License to conduct fund management activities. This material is intended only for institutional investors and may not be distributed to retail investors.
Issued in Canada by William Blair Investment Management, LLC, which relies on the international adviser exemption, pursuant to section 8.26 of National Instrument 31-103 in Canada.
The content contained in this site is intended as informational or educational in nature and does not constitute investment advice or a recommendation of any investment strategy or product for a particular investor. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions. Investors should consult a financial professional/financial consultant or investment adviser before making any investment decisions. Investing includes the risk of loss.
Copyright © 2026 William Blair. William Blair is a registered trademark of William Blair & Company, L.L.C. “William Blair” refers to William Blair Investment Management, LLC and affiliates.
