Alex Duffy: So, emerging US dollar yields are rising, undoubtedly rising. There's good reasons for that. The US economy is relatively robust. Small business survey data looks healthy. That's leading to a pick up in interest rate and yields, and therefore, interest rate rises by the Federal Reserve in the US. What does it mean for global asset classes? Well, it means that global dollar liquidity, which is often the oil that oils the wheels of the global vehicle, it's seeing that liquidity drain from some of these other asset classes, emerging markets included within that, and as a consequence of that, we've started to see a repricing of risk across global emerging markets.
That presents challenges, so, particularly for the weaker players. So, those companies of those countries that have borrowed heavily in US dollars to invest in the local currency assets, they're going to have to reprice that debt at a higher rate. There are implications of that in terms of their ability to pay and in terms of their ability to continue to invest in their companies if you take it to the corporate level. I think that that creates a problem for those countries, those companies, that are in relatively weaker positions. Companies in particular that have taken on foreign currency debt funding local currency assets where it isn't matched by a cash flow profile of the underlying asset in question. They will come under pressure undoubtedly.
However, the flip side of that is that there is always an opportunity for well-managed businesses that haven't taken on those balance sheet instabilities that are able to continue to invest in their products and to continue to take market share. And so, yes, we're going through a cyclical bout of volatility within emerging markets that's putting pressure on the asset class. We as active managers have to follow a process that enables us to manage that volatility, but we also have to use it to take advantage of the opportunities that are being presented in good companies.
And then just finally on your point around what's the direction from here, I think we've come out of a period or we're coming out of a period of unusually low global interest rates since the global financial crisis, and I think that that has led to extrapolation of that rate environment globally and actually as that then gets repriced, we're going to have to get used to heightened volatility. And so, I don't think that this is something that's going to go away anytime soon, and we're going to have to learn to live with it and we're going to have to learn to take advantage of it.