At this time of year our attention turns further afield to more exotic and less familiar jurisdictions. Don’t worry, please read on, the workout has not turned into a travelogue! But we like to follow the latest trends. Advisors and investors bored with a meagre and traditional diet of special situations are widening their horizons and looking at potential opportunities in Emerging Markets.

This isn’t new, as Editor of CEEMEA at my old shop, I often saw non-dedicated investors appearing in our market, who we dismissively called ‘EM tourists.’ Either HY funds stretching for yield – it didn’t end well on Croatia’s Agrokor - or distressed funds/advisors seeking suitable opportunities away from Europe. The financial and legal advisory community does have some dedicated regional specialists, but there are plenty which are agnostic to jurisdiction. Many EM restructurings will head to London or New York for implementation, allowing legal professionals to find lucrative work.

In recent years Emerging Market corporate credit issuance has dwarfed that of high yield. The external EM corporate bond universe is estimated at around $2.5trn in hard currency (similar to European Inv Grade) and $8trn in local currency. In the past couple of years, inflows have surged to record levels, boosted by a weak dollar (bullish, many EM borrowers have a currency mismatch, lower dollar = lower servicing costs). A lot of the inflows have gone into EM high yield as shown below by BofA: