Explain what must be considered when building and running credit portfolios that span several countries

Global credit adds several dimensions: currency exposure and the cost of hedging it; different legal systems, bankruptcy regimes and creditor rights, which affect recovery; varying disclosure and accounting standards; and different sector mixes across markets. Emerging market credit adds sovereign and political risk, commodity dependence, capital controls and thinner trading, and issuers may be state-owned or enjoy implicit government support. Local-currency bonds give the investor currency risk; hard-currency bonds shift the mismatch onto the issuer, which raises default risk if its home currency falls. Hedged comparisons must include hedging costs and the cross-currency basis. The trap is assuming a wider spread abroad is cheap; it may simply pay for weaker recovery, liquidity and currency risk.