4 / 5 Stars
3 4 1 4 1
Zacks Investment Research
Standard & Poor's
4 / 5 Stars
#8 in Emerging Markets Bond
U.S. News evaluated 96 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 -4.59 percent over the past year, 5.47 percent over the past three years, 12.53 percent over the past five years, and 8.72 percent over the past decade.
|Trailing Returns||Updated 02.28.2014|
|Year to date||1.9%|
|3 Years (Annualized)||5.5%|
|5 Years (Annualized)||12.5%|
|10 Years (Annualized)||8.7%|
The T. Rowe Price Emerging Markets Bond fund invests in a diversified range of foreign markets, but doesn’t stick to only the most trusted markets like many of its peers. For instance, as of September 30, the fund’s third largest holding was in Iraqi government bonds and it also had a much smaller holding in North Korea—in other words, the regime the United States changed and the regime it wants to change.
As of March 05, 2014, the fund has assets totaling almost $3.92 billion invested in 433 different holdings. Its portfolio consists heavily of government bonds from South America, Eastern Europe, the Middle East, and Central Asia.
The fund’s objective is to provide high levels of income and/or gradual appreciation. By focusing on the riskier end of the emerging market credit spectrum, which often offers higher yields, the fund has beaten its emerging market peer average in every major return period over the last 15 years. Beside buying bonds with lower credit ratings—in late June, the fund had nearly half of its portfolio allotted to junk bonds—management also favors longer-term debt, which is more susceptible to changes in interest rates. Holding long-term bonds also means that the fund tends to fall behind peers and higher investment-grade funds during heavy bear markets, as it did in 2008. Management also isn’t timid in making large bets. Its top holding, which makes up 8 percent of its portfolio, is a position in Russian government bonds that mature in 2030 and carry a coupon of 7.5 percent. The fund has returned -4.59 percent over the past year and 5.47 percent over the past three years.
The fund’s long-term success—it has been around since 1995—has translated into a large asset base. This large base allows the fund to carry a large amount of cash on its books, so it doesn’t need to sell bonds at rock bottom prices if the bond market hits rough waters. The fund has returned 12.53 percent over the past five years and 8.72 percent over the past decade.
The fund’s strategy is to invest in low-grade and longer-term government debt to reap the highest interest rates possible. It holds the average bond for three years, at which time the bond should have appreciated as it nears its maturity date.
Role in Portfolio
Morningstar’s recommends the fund for a specialty role in your portfolio.
Michael Conelius has managed the fund since 2001. Conelius has more than 20 years of experience, all of which were spent at T. Rowe Price.
T. Rowe Price Emerging Markets Bond Fund has an expense ratio of 0.94 percent.
The fund’s heavy weightings in less stable countries could spell disaster if one of these governments has trouble paying back its debts. Additionally, it’s reliance on long-term bonds give it enormous exposure to volatility caused by rising interest rates.