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Biggest and Best Emerging Market Bond Funds

January 23, 2017

3 Biggest Emerging Market Bond Funds

Templeton Emerging Markets Bond

The $4 billion fund is managed by the experienced managers Michael Hasenstab and Laura Burakreis, who implement a very high-conviction approach. The managers are known for sometimes building quite large stakes in unloved sovereign credits and being highly active in managing duration and currency exposure. They are backed by a well-resourced team of economist and country analysts. The fund has a Morningstar Analyst Rating of Bronze.

Pictet Global Emerging Debt

At $7 billion in assets under management, the fund is one of the largest in the category. The strategy is managed by Simon Lue-Fong, who has over 20 years of experience in emerging markets debt and has been Head of GEM Bonds at Pictet since 2005. The fund is managed with an emphasis on limiting downside risk by establishing profit-loss thresholds for each active position taken. The fund invests mainly in hard currency debt, but may hold up to 30% in local currency bonds. The fund has a Morningstar Analyst Rating of Bronze.

Julius Baer Local Emerging Bond

Far from its $8 billion peak in 2013, the fund’s assets under management are still significant at near $5 billion. This fund is managed by one of the more experienced and stable teams in the category. Lead manager Paul McNamara took over the strategy at its inception in 2000. His two co-managers, Denise Prime and Caroline Gorman–both of whom boast almost two decades’ emerging markets debt investing experience–have been with the strategy for six and 10 years, respectively. The local debt strategy in place here is benchmark-aware but quite flexible. The managers may have exposure to markets not represented in the benchmark, as evidenced by the fund’s roughly 10% stake in Indian government bonds in 2015. The fund has a Morningstar Analyst Rating of Bronze.

3 Best Performing Emerging Market Bond Funds

The November sell-off in emerging markets debt was more severe for the local currency part of the market, as such it is no surprise that hard currency debt funds are among the top performers through November 2016.

Neuberger Berman EM Debt Hard Currency

The fund was launched in May 2013 and has a focus on hard currency debt, primarily sovereign, in order to limit currency risk. The team focus on bottom-up country selection, with top-down beta management, duration

positioning, and corporate allocation playing a secondary role. The lead portfolio manager here, Bart van der Made, is very experienced and together with his co-manager, Mike Reyes, focus on country selection and they rely on the team co-heads, Rob Drijkoningen and Gorky Urquieta, for top-down positioning. Since inception, the strategy has had a solid performance in comparison with its peers. The fund has a Morningstar Analyst Rating of Silver.

Ashmore SICAV EM Sovereign Debt

The fund invests predominantly in hard currency emerging market sovereign and quasi-sovereign debt. The strategy is managed by Ashmore’s large emerging markets debt team. The process here is driven by the investment committee’s views with portfolio managers also having analytical responsibilities. They employ a high conviction approach, which is evident in portfolio positioning. For instance, as at the end of October 2016, the fund had 11.3% in Venezuela against 1.9% for the benchmark.

T. Rowe Price Emerging Markets Bond

Michael Cornelius has managed the fund since its inception at in 2004. He boasts almost three decades of experience. The fund mainly invests in USD-denominated sovereign emerging markets debt but may also hold quasi-sovereign and corporate debt. As at the end of October 2016, the portfolio had 17% in corporate debt versus 0.09% for the JP Morgan Emerging Market Bbond Global Diversified index. The manager placed emphasis on countries that are following reform agendas to improve economic growth. In his view, Brazil – the largest overweighting as at October 2016, Jamaica and Venezuela fit this description.

Source: Morningstar. Morningstar Manager Analysts | 23/01/2017

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