GLOBAL - Pension funds should not wait for emerging market debt to become more researched and re-valued, but look to invest now that yield spreads are still attractive, according to Aberdeen.

Edwin Gutierrez, emerging markets fund manager at Aberdeen, said pension funds were turning increasingly to emerging market debt, but added that many funds were still wary of the relatively under-researched asset class.

Gutierrez told IPE: "A lot of the emerging market countries have not been rewarded as much as they should have for the improvement in their economy, and this leads to inefficiencies investors can use."

He said he expected yields in emerging market bonds - especially sovereign debt - to fall by 200 basis points over the next two to three years as markets are re-valued.

"Emerging markets are not as researched as developed markets, and this has both positive and negative effects," he said.

But the structural improvement of these economies, as well as an increase of debt issued to foreign investors, should be on pension fund trustees' radar, he added.

For him, Brazil is a case in point, with 11% yield on local currency debt and yet a very strong economic outlook as well.

One of the pillars of the economic recovery and future growth is the increase in domestic savings - "much of it comes from the pension fund reforms in the 1990s", Gutierrez noted.

And this local pension fund money is mainly going into domestic debt, strengthening the asset class.

"For our research, we are travelling to these countries and meeting with local pension funds because they play an important role," Gutierrez said.

But a lot of money is also coming from foreign investors.

In fact, many emerging markets are now seeing the share of foreign investments exceeding that of domestic investments for the first time, the fund manager explained.

Others are keeping restrictions on their local currency debt to limit it to domestic investors, or their bonds do not have enough liquidity to attract foreign investors.

And the lines between emerging markets and developed markets "became blurred", Gutierrez said.

"Greece is now in a netherworld - too wealthy for the emerging market index, it would only qualify if it fell out of the euro," he added.