All this week we bring you the best income opportunities across the globe, as picked by top fund managers, professional investors and our own stock and fund analysts as part of Morningstar’s Guide to Finding Investment Income.
Neuberger Berman Emerging Market Debt Hard Currency
This fund remains one of our favourites in its Global Emerging Markets Bond Morningstar Category because of its experienced team, well-executed and solid process, and an above-average track record, says fund analyst Niels Faassen. Morningstar analysts maintain our Rating of Silver.
The team focus on bottom-up country selection, with top-down beta management, duration positioning, and corporate allocation playing a secondary role. We find this a strong process which has been carried out very effectively over time. Though the team’s track record at Neuberger Berman is still relatively short, their long and robust track record at their previous firm bolsters our confidence.
We are less enthusiastic about the above-average fees of this fund. Given the size of the team’s assets under management, we believe it could do more to share its economies of scale with investors.
MFS Meridian Funds Emerging Markets Debt
A stable and experienced management team, collaborative process, and solid track record underpin this fund's Morningstar Analyst Rating of Bronze, says analyst Shannon Kirwin.
The managers follow a collaborative investment process. The five team members meet three times a week for a round-table discussion, where trade ideas are discussed and decisions usually taken as a group, though Ryan has the final say. The process combines top-down considerations with bottom-up analysis of country fundamentals, and the managers have quite a bit of leeway venture off their benchmark.
Over time, investors have done well with this fund. It has outperformed roughly three fourths of its peers over 10 and 15 years and sits comfortably in its category's top half over the more recent three- and five-year periods. Though we think the fund company could do more to lower fees, we value this fund's stable and experienced team and time-tested process.
Pictet Global Emerging Debt
This fund has served investors well, says Kirwin. Just like its hard-currency sibling, Pictet-Global Emerging Market Debt, which has a Morningstar Analyst Rating of Bronze, this fund is run by veteran manager Simon Lue-Fong and his seven comanagers in London and Singapore. The managers enjoy a substantial amount of freedom to deviate from the benchmark, including a basket of up to 33% that can be invested in off-benchmark currencies, hard-currency bonds, and developed-markets debt. The managers make use of that freedom.
Still, it is important to recognise that the strategy here offers less pure-play emerging-markets-debt exposures than other rivals who avoid developed-markets-debt completely.
With that caveat out of the way, however, this remains a compelling offer. The managers have built a solid record; their macro calls have tended to be right more often than wrong, and the fund has handily beaten its benchmark and peer group since its inception as well as over the recent three- and five-year periods, with substantially lower volatility. The fund’s fees could be lower, but overall this strategy remains compelling.
