Emerging Markets Bond

Emerging markets bond mutual funds and ETFs invest the majority of their... Emerging markets bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in emerging countries, which are often are characterized by legal systems that don’t tend to be as stable as developed markets, and productivity levels and living standards that are rising but not yet at the level of advanced economies. 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. At the end of 2020, total emerging market debt stood at approximately US$15 trillion. Investors typically purchase these funds in order to achieve a mix of capital growth and income for their portfolios. Another reason investors buy these funds is that they typically can earn a spread over the yields available in developed markets. 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: 12/23/2024 View more View less

Emerging markets bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in emerging countries, which are often are characterized by legal systems that... Emerging markets bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in emerging countries, which are often are characterized by legal systems that don’t tend to be as stable as developed markets, and productivity levels and living standards that are rising but not yet at the level of advanced economies. 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. At the end of 2020, total emerging market debt stood at approximately US$15 trillion. Investors typically purchase these funds in order to achieve a mix of capital growth and income for their portfolios. Another reason investors buy these funds is that they typically can earn a spread over the yields available in developed markets. 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: 12/23/2024 View more View less