U.S. Treasurys are the polar opposite of what emerging-market investors should be buying.

But for some money managers who typically only focus on high-risk developing nations, they’ve become the asset of choice to preserve capital.

With markets across the world reeling from the spread of the coronavirus, traders are being forced to come up with new ways of hedging their risks.

Among those who have turned to U.S. government bonds are Alejandro Arevalo, who runs funds focused on emerging markets for Jupiter Asset Management Ltd., and Paul McNamara, who oversees more than $7 billion of developing-market fixed-income assets for GAM Investment Management.

“Investors pay us to buy emerging markets, but in this case you have to think outside the box,” Arevalo said, adding that he’s never held so many Treasurys. “It’s simply a flight to safety. Investors appreciate capital preservation more than us trying to hit for the home run.”

Treasurys comprise about 3.5% of his $500 million of assets, but he could buy more because he thinks their rally this year could continue.

So far, it’s working. His main fund has returned 1.7% in 2020, meaning he’s beating almost 70% of competitors, according to data compiled by Bloomberg.

‘Not Trivial’

Global investors have piled into havens, not least Treasurys, as the virus causes governments to shut down schools, impose travel restrictions and cancel business, entertainment and cultural events.

Rates on U.S. sovereign bonds have fallen to record lows in the past month, with 10-year yields dropping below 1% on Tuesday.

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