TCW Emerging Markets Income Fund

U.S. News evaluated 77 Emerging Markets Bond Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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Performance

The fund has returned 14.35 percent over the past year, 11.60 percent over the past three years, 13.59 percent over the past five years, and 11.25 percent over the past decade.

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Summary

The TCW Emerging Markets Income fund makes corporate debt its hallmark.. That departure from the norm seems to have worked: the fund ranks in the top 5 percent of its category for 10-year returns as of the end of 2010.

As of May 03, 2013, the fund has assets totaling almost $7.83 billion invested in 151 different holdings. Its portfolio consists of corporate bonds, with a smaller portion of government bonds and local currency investments in emerging market countries.

David Robbins, who co-manages the fund with Penelope Foley, says the fund’s emphasis on corporate bonds—60 percent of total assets as of late September 2010—distinguishes it from similar funds, which typically only hold around 25 percent. “We think when you’re looking in emerging markets going forward, the two areas of real growth and opportunity are more so in the corporate market and the local currency market,” he says. As of late 2010, about 20 percent of the fund’s assets were in non-dollar-denominated debt securities, providing some extra diversification away from the U.S. dollar.

Lately, Robbins sees the biggest opportunities for emerging markets bonds in Brazil, Mexico, Russia, and Argentina. “There’s a much broader opportunity of corporate sectors that are now represented in the external debt markets, which makes it much more interesting,” he says. The general health of the emerging markets sector continues to improve as well, Robbins says. “Emerging markets are seeing better growth, better balance sheets, and attracting a lot of the fund flows.” The fund has returned 14.35 percent over the past year and 11.60 percent over the past three years.

As of the end of 2010, the fund ranks in the top 2 percent of its category for one-, three- and five-year returns. The fund has returned 13.59 percent over the past five years and 11.25 percent over the past decade.

Investment Strategy

According to Robbins, the fund focuses on finding the opportunities among three categories of emerging market debt: external sovereign debt, external corporate debt, and local currency debt. Unlike many other emerging markets funds, TCW’s Emerging Markets Income Fund focuses more on corporate debt than on government debt.

In general, management makes investment decisions using both top-down and bottom-up methods. “It’s very much a top-down macro view that focuses on interest rates and currencies, and it’s also bottom-up view focusing on individual corporate opportunities and credit metrics within particular countries,”Robbins says. Research teams are dedicated to each of the fixed-income sectors the fund focuses on, including sovereign, corporate, and local currency.

Management

Penelope Foley and David Robbins manage the fund with the support of co-manager and corporate credit analyst Javier Segovia.

Fees

TCW Emerging Markets Income Fund has an expense ratio of 1.11 percent.

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Risk

Emerging markets tend to be more volatile.

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