"Sell-side fixed-income research is not as adequate or as developed as equity research," says Jean-Dominique Bütikofer, head of emerging markets fixed income at Swiss asset manager Union Bancaire Privée. "Wall Street research on Latin American fixed income is quite limited and you really have to dig deep a lot of the time, either by going directly to the issuers to get the info or by asking for equity research. A lot of research is interpretation of ratings agencies’ comments, reports are flow-driven and there’s no guarantee of follow-up notes after the deal is launched. The level of research on corporate debt is similar to what was available on the sovereign side seven to 10 years ago."
Assessment skills needed
Elaborating on comments he made at a Euromoney/LatinFinance conference in New York in May, Bütikofer says that the investors flocking to invest in high-yielding corporate debt could face substantial risks if they lack the necessary credit assessment skills.
"We’ve seen Latin American-focused funds grow tremendously," says Will Landers, manager of BlackRock’s $5.2 billion MLIIF fund. "There’s lots of new money coming in and liquidity has improved. The thing to realize is that quantitative research alone simply is not going to work: you need qualitative work too, to meet company managers and understand their goals.