My optimism, however, improved in the first quarter when market structure broke down in the US treasury market. Now, it’s one thing for liquidity to have a period of dislocation in emerging markets and high yield credit. We’ve come to expect that over the years. It’s another thing when that enters the US treasury market. And it was that concern, that breakdown in market structure, that actually gave me confidence that the Federal Reserve would act.

And that leads me to my second lesson, which is don’t underestimate central banks. Now we know central banks cannot cure pandemic disease. They cannot reopen restaurants. But they’re quite adept at engineering a rise in financial market assets. And I think the Federal Reserve’s response, along with the ECB and other global central banks, bore the lessons of 2008, but in a much more rapid fashion. And by April, we’ve already seen a restoration and improvement in trading liquidity and market structure.

Now the third and final lesson is to be early in less liquid asset classes. If you had told me that March 23rd was the bottom of the first half of the year in market returns, I wouldn’t even have been able to purchase enough securities to make a difference for my client in that short time period. You need to be early in a less liquid asset class. If it feels like self-immolation for a period of time as asset prices fall, that’s okay as long as you’re choosing the right credits. Trying to pick the bottom in an illiquid asset class does not maximize your probability of success.

Now, we’re still in the middle of this. There will be likely additional lessons learned. But I hope that’s a starting point.

Investors do need to be prepared to weather more short-term price swings. But we’re confident that by selecting the companies with strong fundamentals, that EM credit can still generate attractive returns without having to try and call the bottom.

Now, keep in mind the rebound since March 23rd remains modest in an historical context. Now, there are risks. The default cycle is just beginning. And I do expect an elevated default rate in the high yield corporate space and the frontier sovereign space. So you cannot just buy a cross-section of depressed prices and hope for that to work out.

I do really think that security selection will be more essential than it ever has been in emerging market credit. But the good news is, to close, that we are transitioning from a beta market to an alpha market. So in March all asset prices sold off in unison, irrespective of their underlying fundamentals. And I actually think this is much more of a stock-picker’s or bond-picker’s market going forward. There will be greater discrepancy between the haves and the have-nots of emerging markets, and this really does create opportunity for active managers to identify those businesses and identify those countries and avoid the defaults in the period ahead.