Developed Markets Bond

Developed markets bond mutual funds and ETFs invest the majority of their... Developed markets bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in developed countries, which can often be characterized by stable legal systems, high living standards, and high levels of productivity. These funds can be actively or passively managed and may seek to track or outperform a particular benchmark. They may hedge foreign currency risk, or elect to leave themselves exposed to fluctuations in other nations’ currencies. Depending on their mandate, these funds may focus on investment-grade bonds, high-yield (a.k.a. junk bonds), or a mix of credit quality. In addition, these funds may have a mandate to invest in a particular region or continent. According to the World Economic Forum, as of 2022 the largest developed market economies, the G-7, had US$81.3 trillion in debt outstanding. Investors typically purchase these funds in order to achieve a mix of capital growth and income for their portfolios. These funds can appeal to investors with a range of risk tolerances. A fund that exclusively owns investment-grade government bonds will tend to be lower risk than a high-yield fund that invests in junk debt from risky corporations, for instance. Like all fixed-income investments, these funds can come with duration risk, which is the potential that rising interest rates reduce the value of bonds a portfolio already owns. On the flip side, falling interest rates can lead to a rise in the price of bonds. Last Updated: 04/16/2024 View more View less

Developed markets bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in developed countries, which can often be characterized by stable legal systems,... Developed markets bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in developed countries, which can often be characterized by stable legal systems, high living standards, and high levels of productivity. These funds can be actively or passively managed and may seek to track or outperform a particular benchmark. They may hedge foreign currency risk, or elect to leave themselves exposed to fluctuations in other nations’ currencies. Depending on their mandate, these funds may focus on investment-grade bonds, high-yield (a.k.a. junk bonds), or a mix of credit quality. In addition, these funds may have a mandate to invest in a particular region or continent. According to the World Economic Forum, as of 2022 the largest developed market economies, the G-7, had US$81.3 trillion in debt outstanding. Investors typically purchase these funds in order to achieve a mix of capital growth and income for their portfolios. These funds can appeal to investors with a range of risk tolerances. A fund that exclusively owns investment-grade government bonds will tend to be lower risk than a high-yield fund that invests in junk debt from risky corporations, for instance. Like all fixed-income investments, these funds can come with duration risk, which is the potential that rising interest rates reduce the value of bonds a portfolio already owns. On the flip side, falling interest rates can lead to a rise in the price of bonds. Last Updated: 04/16/2024 View more View less