Positioning in Core Bonds and Emerging Markets

Topics Covered:

Portfolio construction in today’s macro climate — balancing risk, correlations, and tracking error.

Credit market health — Morningstar DBRS and Proskauer data show improving leverage, coverage, and default rates.

Bond market reset — Deutsche Bank’s historical context on the worst 5-year Treasury returns and forward expectations.

Opportunities in core bonds — PIMCO’s view on yields, international duration, and diversification benefits.

DeepMacro model positioning — long USD, contrarian equity overweight, and rates strategy.

Trend-following under pressure — why CTAs are lagging in 2025.

Emerging markets strategy — Victor Zhou on activeness, tracking error, and the under-researched alpha potential in EM small caps.

Key Takeaways:

Dollar correlations are a driver of our U.S. equity overweight.

Credit fundamentals are stronger, with default rates falling.

Bond valuations have reset, creating better entry points, but real returns may remain modest.

Trend-following struggles highlight the need for multi-strategy systematic approaches.

In emerging markets, higher activeness and small-cap allocations improve alpha opportunities.

References:

Morningstar DBRS

Proskauer Private Credit Default Report

Deutsche Bank Global Markets Research

PIMCO Fixed Income Outlook

DeepMacro Model Positioning

State Street Emerging Markets Strategy Research

The information presented is for informational purposes only and should not be considered as investment advice nor as a recommendation of any particular strategy, allocation or investment product: before making any investment decision, you should seek expert, professional advice and obtain information regarding the legal, fiscal, regulatory and foreign currency requirements for any investment according to the laws of your home country and place of residence. Investing involves risk, including the possibility of loss of principal. Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts.

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