2 / 5 Stars
3 3 1 1 3
Zacks Investment Research
5 (Strong Sell)
Standard & Poor's
3 / 5 Stars
#25 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 -16.02 percent over the past year, -0.60 percent over the past three years, 8.39 percent over the past five years, and ((UNHANDLED FORMAT TYPE: percents, NoneType for None)) over the past decade.
|Trailing Returns||Updated 01.31.2014|
|Year to date||-4.7%|
|3 Years (Annualized)||-0.6%|
|5 Years (Annualized)||8.4%|
|10 Years (Annualized)||N/A|
It’s hard to find a foible in this bond fund. The PIMCO Emerging Local Bond fund invests in government and corporate debt in up-and-coming emerging market countries. By investing in bonds issued in a foreign currency rather than the dollar or the euro, the fund is perfectly poised to beat competitors in an environment in which these currencies are depreciating relative to many emerging market rivals.
As of February 05, 2014, the fund has assets totaling almost $10.73 billion invested in 515 different holdings. Its portfolio consists of high-interest emerging market bonds of middling quality and substantial long and short currency bets.
Management favors short-term bonds, which gives the fund less exposure to volatility caused by interest-rate changes. Thus in 2008, when its peers lost an average of 14 percent, the PIMCO Emerging Local Bond fund lost just 10 percent. The fund has returned -16.02 percent over the past year and -0.60 percent over the past three years.
The fund carries a relatively higher grade of debt than its peers, preferring BBB-rated bonds or above. More than 55 percent of the fund’s bonds offer coupons, or interest payments, between 8 and 12 percent. It uses these ultra-high coupons to pay a steep 7 percent yield. In search of these high yield bonds, the fund focuses on South Africa, Turkey, Thailand, Indonesia, and Brazil as its main bond markets.
The fund’s objective is to obtain the highest total return possible. The fund seeks to invest at least 80 percent of its assets in emerging market government and corporate bonds. It also holds the majority of those bonds in the currency of the issuing country. This allows the fund to bet on the appreciation of local currencies, buoyed by historically strong economic growth in many emerging markets. The fund may also take direct long and short positions on foreign currencies. It uses derivatives such as options, futures contracts, and swap agreements.
Role in Portfolio
Morningstar recommends this fund play a specialty role in your portfolio.
Michael Gomex has run the fund since its inception in December 2006. Working in PIMCO’s Munich office, he is involved in developing the company’s overall emerging market strategy.
PIMCO Emerging Local Bond Fund has an expense ratio of 1.35 percent.
Emerging market debt tends to be volatile because these bonds often face heavier exposure to more less-stable political systems than developed economy bonds.