Yield-hungry investors are growing their appetite for emerging markets debt, as rock-bottom interest rates have led to paltry returns from bonds in the developed world.Analysis from EPFR Global shows that emerging markets bond funds have seen net inflows of around $1 billion per week this year, as investors opt to expose their money to economies that are growing at a much faster clip than those in the western world.Last week, Alexander Moseley, a senior portfolio manager based in Schroders’ New York office and an expert in emerging market debt, was in Bermuda to brief institutional clients on the opportunities in the asset class and the best strategies for exploiting them.In an interview with The Royal Gazette, Mr Moseley said emerging markets bonds, both sovereign and corporate, had gained investor credibility since the mid-1990s, when about ten percent of such bonds were of investment grade, compared to two thirds today.Demand was growing, driven by a shift in the asset allocations of institutions like insurance companies and sovereign wealth funds, whose assets under management totalled more than $4 trillion, Mr Moseley said.Adding to the appeal of emerging markets debt was the flood of liquidity injected by central banks like the US Federal Reserve, the European central Bank and the Bank of Japan into developed world economies, forcing interest rates down to ultra-low levels and forcing investors to look elsewhere for yield.Emerging markets also had superior economic fundamentals and more favourable demographics to drive future growth than developed countries, he added.Debt defaults were not a rare occurrence in emerging markets back in the 1990s. But now institutional investors are much more comfortable with the prospect of investing in debt from countries like Brazil and Indonesia. “It’s no longer a question of ‘should we increase our allocation to emerging markets debt’, but ‘how do we do it’?” Mr Moseley said.Mr Moseley said there were several different sectors of emerging markets debt — sovereign, corporate, local currency and dollar-denominated. To optimise returns, investments needed to be actively managed and have the capability to shift between sectors.“It’s easy to be a cheerleader for the entire asset class, but there will always be times when certain countries and certain sectors are more attractive than others,” Mr Moseley said. “The multi-sector strategy we use at Schroders allows us to take advantage of the best opportunities.”Schroders is a global investment house with $327 billion of assets under management, according to its website. Its relationships with Bermuda clients are managed out of New York, where Mr Moseley works as part of the team managing the ISF Emerging Market Sovereign Bond fund, led by James Barrineau and supported by Fernando Grisales and Chris Tackney.The same team also manages Schroders’ ISF Emerging Markets Bond fund, which blends the sovereign bond fund and the ISF Emerging Market Corporate Bond fund, which is itself managed through Schroders’ Singapore office.All three funds were launched in July this year.Mr Moseley said that this structure, along with Schroders’ global expertise, supported the execution of the multi-sector emerging markets debt strategy that was proving attractive to investors.