Global sovereign downgrades set for a record year

Sovereign credit ratings are on track for a record number of downgrades in 2016, driven by the impact of lower commodity prices in emerging market economies. This is important for institutional investors, who are often not allowed to invest in countries below a certain rating due to risk. Fitch Ratings has made 14 downgrades this year. Seven of the 10 most commodity-dependent sovereigns rated by Fitch have been downgraded or are on ‘Negative Outlook’. All are emerging markets. A commodities rally in the first half of the year led to an increase in market sentiment for emerging markets – yet Fitch said that public and external finances in a number of commodity-exporting countries were not yet aligned with the new structurally-lower price environment. The UK was also downgraded, with Fitch stating that “the significance of the UK's pending exit from the EU is difficult to overstate”. The firm also said that Europe's political backdrop could have negative implications for sovereign ratings, as fiscal consolidation may drop further down the list of policy priorities. “Comparatively high government debt levels are observed in several Eurozone sovereigns, and are likely to remain effective rating constraints,” said James McCormack, global head of sovereign ratings at Fitch. ©2016 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.