Industry Voice: New Country Research Head Explains How Role Will Enhance Eaton Vance's Edge In EM Debt

For most of my six years at Eaton Vance, I have been a mentor and coach to our research associates who undertake the day-to-day, country-level research. In consultation with the co-directors of the Global Income team, Mike Cirami and Eric Stein, we decided - given my continued interest in both the research process and mentoring our newer research professionals - that it would be valuable to formalise the role. Having one of the senior portfolio managers, like myself, serve as Director of Country Research also emphasises the importance we attach to conducting country-level research. Another reason my role was created relates to the increasing levels of interest from prospective investors and clients in how we conduct research. One of my responsibilities as Director of Country Research will be to centralise the engagement we have with prospects and existing clients by communicating and distilling our research process to an external audience. As our business continues to grow, we want to make sure that all of our activities are conducted in the most efficient manner possible. Centralising the management of research is part and parcel of this ongoing endeavour.

Why is it important? Nearly 20 years ago, I attended a lecture on the concept of economic freedom and how it related to socioeconomic outcomes. Countries were ranked in terms of economic freedom with Hong Kong and Singapore at the top, along with a number of other former British colonies. Utilising this ranking, academicians began demonstrating that in countries with a high level of economic freedom, people lived longer, there was less child labour, greater access to clean water, along with everything else that one associates with social-economic well-being. This led me to join an academy of economists who study what differentiates the economic outcomes of countries. Pursuing this as an intellectual interest, in 2005, I published an academic journal article that related economic freedom to equity market returns.¹ Much to my disappointment, I found no relationship between the level of economic freedom and equity market returns. Rather, what showed up in the empirical analyses (I published further on this topic in 2016²) is the importance of the direction of change in government policy. Simply put, you want to invest in countries where economic freedom is increasing and avoid those where economic freedom is decreasing. Never mind what the current conditions are. Since then, I went on to write a Ph.D. thesis and have had various articles published on currency and bond markets and their relationships to economic freedom. In mid-2019, I published results of a study relating economic freedom to emerging-markets debt returns. Again, what shows up is a clear correlation between country-level economic policy change and investment returns. So yes, my intellectual interests over the past 20 years or so have centred on the relationship between government policy, social-economic well-being and investment returns. What is demonstrably evident, to me at least, is that country-level research should be a core part of EM investing. In fact, one of the reasons I was drawn to join Eaton Vance's Global Income team in the first place is our like-mindedness on this point. The team focuses specifically on individual countries and government policies.

From the time I joined Eaton Vance six years ago until April 2019, I was the global macro equity strategist within the Global Income team. This might sound odd: having an equity portfolio manager within a "Global Income" team, but remember that our Global Income team also runs absolute return strategies (e.g., global macro and global macro advantage), which focus on country-level research and endeavour to identify changes in government policies that would relate to or affect asset class returns, including equity market returns. Within the Global Income team, there have always been synergies between the macro equity research efforts and EM debt team's investment professionals, who spend each day thinking about country-level risks, opportunities and changes in policies. This is also the reason we manage our emerging- and frontier-market equity fund from the global income desk. Prior to joining Eaton Vance, I was a direct investor residing in North Africa.

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