Emerging markets (EM) have had a rough outing amid the pandemic, a rising U.S. dollar, global inflation, and now Russia’s invasion of Ukraine. However, should EM roar back in a big way, its bonds could also get a boost.
The MSCI Emerging Markets index is down 11% in 2022 and 16% within the past year. DoubleLine Capital CEO Jeff Gundlach, otherwise known as the “Bond King,” sees EM equities as an undervalued option.
“I recommend that investors dollar-cost average out of US stocks and into emerging-market stocks,” Gundlach said. “That is a way of resculpting portfolios that will take advantage of the trends that are underway.”
Stocks and bonds have been moving in tandem as of late, but the latter have been seeing more activity as investors de-risk amid the market uncertainty. That could also have a spill-over effect for bonds outside the safe confines of the U.S., which opens up investors to potentially more yield with EM bonds.
Getting EM Bond Exposure
Investors don’t have to research the whole universe of EM bonds available in the global debt market. They can get it all in one fund: the Global X Emerging Markets Bond ETF (EMBD).
EMBD is an actively managed fund sub-advised by Mirae Asset Global Investments (USA) LLC that seeks a high level of total return, consisting of both income and capital appreciation, by investing in emerging market debt. EMBD primarily invests in emerging market debt securities denominated in U.S. dollars, however, the Fund may also invest in those denominated in applicable local foreign currencies.
Securities may include fixed-rate and floating-rate debt instruments issued by sovereign, quasi-sovereign and corporate entities from emerging market countries. This adds a touch of diversification to an investor’s core bond portfolio.
EMBD gives investors:
- Experienced Portfolio Managers: EMBD’s portfolio managers have extensive track records in actively managed emerging market debt strategies.
- Competitive Cost: At a 0.39% total expense ratio, EMBD offers the outperformance potential and risk management of active portfolio managers, at a competitive cost.
- High Yield Potential: By targeting emerging market debt securities, EMBD aims to offer high yields with low correlations to other fixed-income securities.
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