Investors should look to emerging markets allocation, with the asset class likely to gain momentum in the long term, according to Goldman Sachs Asset Management (GSAM).
The asset manager said that while emerging markets were once only considered a niche investment option, changing global conditions have seen the asset class attract increasing interest.
"The actual difference between a developed and an emerging market has really narrowed over time and it's made emerging market bonds more attractive than they've ever been," GSAM lead portfolio manager, global fixed income, Blair Reid said.
"I think the message we would like to convey is really what has been very niche is really going to become core over time."
GSAM said emerging market local debt would be a particularly strong investment theme given the recent low returns on traditional government bonds.
The asset manager also said that given the outlook for the Australian dollar, now would be a particularly attractive time for investors to enter the market.
"Three or four years ago, with movements in the Australian dollar, it would have eaten up a lot of the very positive returns in the market via movements against you in the currency," Mr Reid said.
"Now, as we expect the Australian dollar to normalise over time, the entry point to [emerging market debt] is actually very, very attractive.
"There are also the benefits of diversification, so we very much see emerging market local debt coming into the mainstream."
To make the most of this trend, GSAM has launched a Goldman Sachs Growth & Emerging Markets Debt Local Fund which enables retail investors to access local currency fixed interest in emerging markets.
GSAM said the fund is the first of its kind in Australia and will allow domestic investors to access a key driver of global growth.
"Emerging market fixed interest offers genuine diversification benefits within a balanced portfolio," GSAM Australia's head of third party distribution, Jessica Jones, said.
"The Goldman Sachs Growth & Emerging Markets Debt Local Fund provides exposure to an existing asset class for Australian investors targeting income and capital growth."
