Frontier Markets Bond

Frontier markets bond mutual funds and ETFs invest the majority of their... Frontier markets bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in frontier countries, which are often characterized by legal systems that don’t tend to be as stable as developing markets, and productivity levels and living standards that are rising but not yet at the level of emerging markets. 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. Total debt in frontier markets economies reached US$3.5 trillion in 2021. 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 usually only appeal to investors with a very high risk tolerance. These economies usually are not nearly as transparent as emerging markets or developed markets, and default risk tends to be much higher as well. 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 in a portfolio. On the flip side, falling interest rates can lead to a rise in the price of bonds. Last Updated: 04/18/2024 View more View less

Frontier markets bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in frontier countries, which are often characterized by legal systems that don’t... Frontier markets bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in frontier countries, which are often characterized by legal systems that don’t tend to be as stable as developing markets, and productivity levels and living standards that are rising but not yet at the level of emerging markets. 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. Total debt in frontier markets economies reached US$3.5 trillion in 2021. 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 usually only appeal to investors with a very high risk tolerance. These economies usually are not nearly as transparent as emerging markets or developed markets, and default risk tends to be much higher as well. 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 in a portfolio. On the flip side, falling interest rates can lead to a rise in the price of bonds. Last Updated: 04/18/2024 View more View less