In December 1998, financial markets were still reeling from Russia’s default and, a year earlier, an Asian financial crisis that upended developing economies all over the world. It was against this volatile and seemingly inauspicious backdrop that Payden & Rygel launched the Payden Emerging Markets Bond Fund (PYEMX). Since then, the fund has captured opportunities in a rapidly evolving asset class which remains among the highest-yielding public debt market options for investors.

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Payden & Rygel’s Payden Emerging Markets Bond Fund (PYEMX) celebrates 25 years of seizing Opportunity in a changing asset class. (Graphic: Business Wire)

Payden’s team has navigated a market for emerging market debt that has grown and matured over the past quarter century, now offering more opportunities than ever to investors. The asset class includes a broad spectrum of issuers, with investment opportunities of varying risk/return characteristics. Consider that:

  • The number of countries in one of the most widely used emerging market bond indices has grown from eight to seventy, achieving diverse regional representation from Central and Eastern Europe, the Middle East, Africa, Latin America, and Asia.
  • While sovereigns are still a core option for investors, unlike in 1998 investors today can also gain exposure to a large universe of emerging market quasi-sovereign and corporate bonds.
  • Investors no longer need to stick to U.S. dollar or Euro-denominated bonds: they can buy local currency bonds from both established and frontier emerging markets.

As the emerging markets debt universe expands and diversifies, investors have more opportunities to manage volatility. For instance, while sovereign defaults have recently increased in the aftermath of the pandemic, the average emerging market economy has managed to avoid dramatic adverse outcomes such as those in 1997/8 thanks to better economic policy management and stronger external buffers.

The future looks bright as well. Says Payden Emerging Markets Bond portfolio manager and managing director Kristin Ceva, “Looking forward, many EM central banks have already responded to disinflation by cutting rates, and economic activity in EM countries has been resilient. A stable growth backdrop, combined with lower inflation, has resulted in reduced market volatility and overall support for risk assets. That said, we remain alert to global and country-specific risk factors.”

“In our view, EM debt offers diversification benefits, and elevated yields have historically generated healthy long-term income for investors,” adds Ceva. “Valuations in EM debt are compelling compared to peer sectors, and we see opportunities across a variety of hard and local currency markets, making this a suitable time to reconsider the asset class.”

The Payden Emerging Markets Bond Fund invests in a diversified portfolio of emerging-market sovereign and corporate bonds. The fund invests in countries that are identified through extensive analysis of their macroeconomic variables, sovereign credit ratios, political stability, and the quality of the country’s business environment. The fund maintains geographic diversification across Latin America, Europe, Middle East, Africa, and Asia. Most of its investments are U.S. dollar-denominated, but there are attractive opportunities in select local markets.

About Payden & Rygel

With $156.8 billion under management, Payden & Rygel is one of the largest privately-owned global investment advisers. Founded in 1983, the firm manages fixed income and equity portfolios through domestic and international solutions. Advising the world's leading institutions and individual investors, Payden & Rygel provides customized strategies across global capital markets. Payden & Rygel is headquartered in Los Angeles and has offices in Boston, London, and Milan.

Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so investors' shares, when sold, may be worth more or less than their original cost. For the most recent month-end performance, which may be higher or lower than that quoted, visit our website at payden.com or call 800 572-9336.

For more information and to obtain a prospectus or summary prospectus, visit payden.com or call 800 572-9336. Before investing, investors should carefully read and consider investment objectives, risks, charges, expenses and other important information about the Fund, which is contained in these documents. Investment in foreign securities entails certain risks from investing in domestic securities, including changes in exchange rates, political changes, differences in reporting standards, and, for emerging-market securities, higher volatility. Investing in high-yield securities entails certain risks from investing in investment grade securities, including higher volatility, greater credit risk, and the issues’ more speculative nature. The Payden Funds are distributed through Payden & Rygel Distributors, member FINRA.

Kate Ennis DAI Partners ennis@daipartnerspr.com (301)580-6726