4 / 5 Stars
5 5 1 5 2
Zacks Investment Research
Standard & Poor's
5 / 5 Stars
#4 in Emerging Markets Bond
U.S. News evaluated 94 Emerging Markets Bond Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.
The fund has returned -7.47 percent over the past year, 6.35 percent over the past three years, 13.39 percent over the past five years, and 8.72 percent over the past decade.
|Trailing Returns||Updated 01.31.2014|
|Year to date||-1.6%|
|3 Years (Annualized)||6.4%|
|5 Years (Annualized)||13.4%|
|10 Years (Annualized)||8.7%|
Emerging markets can take investors on a wild ride sometimes. To help smooth things out, fund manager John Carlson takes a more conservative approach to investing in emerging markets bonds by steering clear of big interest-rate or currency bets and mainly buying less-risky government-backed bonds.
As of February 05, 2014, the fund has assets totaling almost $4.28 billion invested in 333 different holdings. Its portfolio primarily consists of U.S. dollar-denominated government bonds in emerging markets countries, with a smaller portion of corporate and local currency bonds.
According to Morningstar, Carlson is "quite diversification-conscious." Lately, the fund has been overweight in countries such as Argentina and "frontier markets" in Africa including Ghana, Gabon, and Ivory Coast. Although the fund has only a modest position in local currencies, Carlson says he likes the currencies in Brazil, Indonesia, and Turkey because of the growth prospects and the fiscal austerity in each of those countries. The fund has returned -7.47 percent over the past year and 6.35 percent over the past three years.
Carlson's decision to overweight Argentina, Russia, and Ukraine boosted the fund's performance in 2009 and has contributed to the fund's solid long-term returns. The fund's three- and five-year returns rank it in the top 8 percent and 18 percent of its category, respectively, as of the end of the first quarter. The fund has returned 13.39 percent over the past five years and 8.72 percent over the past decade.
This fund seeks income and capital appreciation and uses a top-down approach to identify opportunities in the market. “The objective is to avoid blow-ups, and to look for undervalued sovereign opportunities,” says Carlson. “In laymen’s terms, that means doing a lot of hard credit work and getting there before the crowd.”
To construct the portfolio, Carlson looks at the global, macro backdrop, then considers what’s happening within emerging markets. Then he builds the portfolio country-by-country and bond-by-bond, collaborating heavily with his research team to come up with the market inferences that direct his investment decisions.
The fund also has a small amount of corporate bonds, local currency bonds, and equities designed to “add to the [fund’s] performance and returns,” Carlson says.
Role in Portfolio
Morningstar calls this fund a specialty investment.
John Carlson has been in charge of the fund since 1995, which, according to Morningstar, makes him the second-longest serving emerging-markets bond fund manager. In the past, Morningstar has described Carlson as being defensive in a very aggressive asset class, a depiction Carlson supports with the caveat that his approach is less about being defensive and more about being consistent. “I characterize myself as a core manager,” Carlson says. “To get that consistency, I have the belief that what the prospectus says I actually do. There is no style drift and I have a very disciplined approach to risk limits and how far I’ll go outside the benchmark at any time.”
Fidelity New Markets Income Fund has an expense ratio of 0.84 percent.
Emerging markets are known for being volatile.