Wall Street Reaps 97% Return by Trading EM ‘Special Situations’

Buying debt sold by the lowest-rated countries scares off most investors. On emerging markets desks across the globe though, that type of risky wager is being dubbed “special situations” — and its popularity is growing.

The strategy has been gaining traction across Wall Street, helping a handful of money managers beat the returns across traditional emerging-market investing. Vontobel Asset Management and Abrdn Plc, whose flagship EM hard-currency funds have beaten at least 89% of peers over the past year, are among those who’ve benefited from the trade.

Those bets have flourished in the past year as nations including Nigeria ...