Emerging markets fixed income has only had negative returns for three years in its 20-year history, Luz Padilla, senior portfolio manager, emerging markets fixed income at DoubleLine, tells Managing Editor Lorie Konish. Here, Padilla discusses how the asset class has changed and which countries are poised to succeed in the coming year.

1. How has the role of emerging markets fixed income changed? After 2008 we started to see greater participation by new investors. In 2009 it was more directed toward local currency investment. In the last couple of years, the flows have really been more directed into dollar-denominated emerging market debt. Part of it has a great deal to do with the way emerging market debt proved itself to be so resilient to the global banking sector crisis. The performance of the asset class in 2009, 2010 and 2011, certainly has had positive and, in [some] cases, strongly positive returns. That gave investors that had not previously participated in this asset class the vote of confidence to be able to put money to work.

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