In the first quarter, the Virtus Stone Harbor Emerging Markets Debt Income Fund (Class I) demonstrated strong performance, achieving a return of -0.93%. This result notably surpassed its benchmark, the J.P. Morgan EMBI Global Diversified Index, which registered a return of -1.26% over the same period. This positive differential underscores the fund's effective management in a challenging market environment.
Key contributors to this outperformance were strategic allocations and selections within hard currency sovereign debt. Significant gains were observed from an overweight position in Venezuela and specific issuer selections in Ukraine and Panama. Conversely, underweight positions in Bahrain and the UAE also played a crucial role in enhancing the fund's returns. During this quarter, only two countries within the investment-grade segment managed to deliver positive returns, reflecting the broader market's difficult conditions.
The fund's success in navigating the complexities of the emerging markets debt landscape during Q1, particularly amidst rising U.S. rates and geopolitical tensions in the Middle East, suggests the value of active management. The ability to identify and capitalize on opportunities in specific sovereign debts, while judiciously avoiding underperforming areas, highlights a disciplined investment philosophy. This strategic approach is essential for investors seeking to generate alpha in diverse and often unpredictable global markets.
