Emerging-Markets Exposure in Medalist World-Bond Funds
Emerging-markets stakes run the gamut.
Global bond indexes have allocated increasingly more to emerging-markets debt over the past several years--for example, the widely used Barclays Global Aggregate Index had a 16% stake as of September 2015. Today, most world-bond funds invest at least 10% of assets in emerging-markets bonds, and some have 40%-50% allocations. Higher-yielding emerging-markets bonds come with amplified risks, though.
Emerging-markets currencies have been extremely volatile in recent years and can easily wipe away the bonds' yield advantage, though managers may fully or partly hedge this risk. Emerging-markets country fundamentals can change quickly with shifts in political regimes or geopolitical risk. Country and corporate defaults are another consideration, as are commodity price swings, which can weigh heavily on export-driven nations. These risks, in addition to the illiquidity of certain segments of this market, make emerging-markets debt subject to swift sell-offs. This was especially clear in this year’s third quarter, when emerging-markets currencies were hit especially hard, and world-bond funds with heavier emerging-markets exposure suffered mid-single-digit losses.
Karin Anderson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.