The international debt markets, particularly in emerging economies, have developed into an important asset class. The behavior of numerous international and local market participants with sometimes idiosyncratic objectives – local investors, international investors, retail funds, and private banks – distinguishes the market for international debt from other fixed income markets. One premise of our investment strategy is that investments in global debt securities may provide investors with excellent returns with low correlation to other asset classes. Many of these investments remain event-driven and may be independent of external market factors. Our experience in these markets provides a competitive advantage in identifying opportunities in both sovereign and corporate debt, and the two sub-segments complement each other well in terms of portfolio construction.
The international corporate bond market has experienced rapid growth over the past several years. The market has expanded significantly in both depth and breadth, making the corporate market far larger than it has been historically, both in terms of notional debt outstanding as well as the number of issuers and issues. We believe that this rapid growth increases the probability of finding inefficiencies that translate into investment opportunities. These inefficiencies are particularly pronounced in the non-investment grade segment of the market. We view this relatively new market breadth as allowing us to construct portfolios using a range of securities from a more diversified spectrum of issuers, industries and countries than was historically possible.