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SICAV

Emerging Local Markets Bond Fund

Research-driven investment in emerging market local currency sovereign bonds.

ISIN LU0310189781 Bloomberg TRPELMI:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

3.44%
$96.3m

1YR Return
(View Total Returns)

Manager Tenure

3.09%
7yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.05
1.47%

Inception Date 09-Aug-2007

Performance figures calculated in USD

Other Literature

29-Feb-2020 - Andrew Keirle, Portfolio Manager,
The coronavirus outbreak will continue to drive sentiment, likely triggering bouts of volatility in the near term. Policy action from major central banks, particularly if coordinated, could boost government bond prices globally. However, until it is clear that the global spread of the virus has been contained, emerging market (EM) local currency assets could continue to see weakness. In this environment, we see new opportunities for long-term investors amid improved valuations.
Andrew Keirle
Andrew Keirle, Portfolio Manager

Andrew Keirle is a senior portfolio manager in the Fixed Income Division and a member of the Global Fixed Income Investment Team. Mr. Keirle is the lead portfolio manager for the Emerging Markets Local Currency Bond Strategy and has important input on a number of emerging markets bond strategies and global fixed income strategies. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Click for Manager Outlook
 

Strategy

Manager's Outlook

We remain constructive on the outlook for EM local currency bonds at the beginning of 2020. The asset class remains one of the highest-yielding opportunities in the fixed income market.

Following a weak economic backdrop in 2019, global growth is expected to improve heading into the new year. Importantly, we see the potential for EM growth to improve relative to growth in developed markets, which should help support inflows into EM assets. Inflation in EM remains mostly contained, which provides flexibility to EM central banks if needed. In this environment, fundamentals remain broadly stable, including disciplined government spending, largely balanced current accounts, and rational economic policy in most major EM markets.

The technical backdrop should remain supportive of emerging market assets in the near term. The Federal Reserve is expected to keep interest rates on hold, and the European Central Bank maintains its quantitative easing program. Overall, the accommodative stances by major developed market central banks should keep global yields contained, propping up demand for EM bonds.

Over the longer term, we also see the potential for the U.S. dollar to continue to decline against global currencies following an extended period of strength. Therefore, we continue to hold a construction view on EM currencies following the late rally in 2019.

Overall, valuations are still attractive versus EM fundamentals as well as other asset classes. However, the late rally in 2019 means they are not as cheap as they were earlier in 2019. Therefore, the market is susceptible to a disruptive geopolitical event or if economic weakness returns. We maintain our focus on countries displaying long-term reform momentum and stable fundamentals.

Investment Objective

To maximise the value of its shares through both growth in the value of, and income from, its investments. The fund invests mainly in a diversified portfolio of bonds of all types from emerging market issuers, with a focus on bonds that are denominated in the local currency.

Investment Approach

  • Focus primarily on sovereign debt denominated in the currencies of the respective emerging countries.
  • Integrate proprietary credit research and relative value analysis.
  • Establish independent credit rating by country.
  • Add value through active country, currency and individual security selection decisions.
  • Limit risk through diversification.
  • Employ long-term investment horizon combined with low portfolio turnover.

Portfolio Construction

  • Higher concentration portfolio structure: typically 100-150 securities
  • Duration bands: managed within +/- 2 years of the benchmark
  • Average Credit Quality: BBB
  • Country exposure maximum 30% per country
  • Target tracking error: 200-400 bps

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Annualised
Fund % 3.09% 3.44% 2.08% 1.82% -0.40%
Indicative Benchmark % 3.73% 3.95% 2.01% 1.94% -0.38%
Excess Return % -0.64% -0.51% 0.07% -0.12% -0.02%

Inception Date 09-Aug-2007

Manager Inception Date 31-Oct-2012

Indicative Benchmark: Linked Benchmark

Data as of  29-Feb-2020

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 13.77% 6.78% 2.89% 2.41%
Indicative Benchmark % 13.47% 7.03% 2.78% 2.57%
Excess Return % 0.30% -0.25% 0.11% -0.16%

Inception Date 09-Aug-2007

Indicative Benchmark: Linked Benchmark

Data as of  31-Dec-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 31-Mar-2020 Quarter to DateData as of 31-Mar-2020 Year to DateData as of 31-Mar-2020 1 MonthData as of 29-Feb-2020 3 MonthsData as of 29-Feb-2020
Fund % -12.20% -16.41% -16.41% -3.59% -0.58%
Indicative Benchmark % -11.07% -15.21% -15.21% -3.41% -0.71%
Excess Return % -1.13% -1.20% -1.20% -0.18% 0.13%

Inception Date 09-Aug-2007

Indicative Benchmark: Linked Benchmark

Indicative Benchmark: Linked Benchmark

Performance figures calculated in USD

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Effective 1 January 2011, the benchmark for the sub-fund was changed to J.P. Morgan Government Bond Index-Emerging Markets (GBI-EM) Global Diversified. Prior to 1 January 2011, the benchmark was the J.P. Morgan Government Bond Index-Emerging Markets Broad Diversified Index. The benchmark change was made because the firm viewed the new benchmark to be a better representation of the investment strategy of the sub-fund. Historical benchmark representations have not been restated.

29-Feb-2020 - Andrew Keirle, Portfolio Manager,
Emerging market (EM) local currency bonds posted negative returns in February amid ongoing concerns surrounding the coronavirus. Bond prices were mixed, finding support from accommodative monetary policy announcements. EM currencies struggled and drove overall negative returns. In the portfolio, our underweight to Turkish government bonds made a positive contribution to relative performance. Turkey suffered from idiosyncratic weakness amid escalating tensions with Russia over the conflict in Syria. Our overweight exposure to Indonesia duration, however, hurt performance as the country’s curve steepened. Our underweight to some central and Eastern European markets bonds also dragged as the sharp moves higher in core eurozone bonds pulled up neighbouring markets. In currencies, our overweight positions in the Brazilian real and Russian rouble had a negative impact as declines in global commodity prices hurt both country’s economies. On the positive side, our longstanding overweight position in the Egyptian pound helped performance.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 70.73% Was (31-Jan-2020) 73.89%
Other View Top 10 Issuers

Monthly data as of 29-Feb-2020

Holdings

Total
Holdings
103
Largest Holding Republic of South Africa Government Bond 3.77% Was (30-Sep-2019) 2.73%
Top 10 Holdings 30.43%
Other View Full Holdings Quarterly data as of 31-Dec-2019

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating Reserves A
By % 4.44% -7.40%
Fund 4.44% 25.33%
Indicative Benchmark 0.00% 32.73%

Average Credit Quality

BBB

Monthly Data as of 29-Feb-2020
Indicative Benchmark:  J.P. Morgan GBI - EM Global Diversified

Sources for Credit Quality Diversification: Moody's Investors Service and Standard & Poor's (S&P) split ratings (i.e. BB/B and B/CCC) are assigned when the Moody's and S&P ratings differ. Short-Term holdings are not rated.

Duration View duration analysis

  Largest Overweight Largest Underweight
Duration 5-7 Years 1-3 Years
By % 13.78% -15.59%
Fund 31.98% 9.00%
Indicative Benchmark 18.20% 24.59%

Weighted Average Duration

5.24 Years

Monthly Data as of 29-Feb-2020
Indicative Benchmark:  J.P. Morgan GBI - EM Global Diversified

31-Dec-2019 - Andrew Keirle, Portfolio Manager,

Bond Allocation

  • Our portfolio holds overweight positions in countries with the potential to maintain or ease monetary policy stances, including Mexico and Brazil.
  • In Asia, we increased an overweight to India where we see the potential for monetary policy to support local bond markets. We also maintained an overweight to Indonesia where we see inflation remaining contained. �We reduced our out-of-benchmark exposure to Sri Lanka during the period as some pro-growth government policies may increase fiscal borrowing. ��
  • In emerging Europe, we hold an overweight to Russia but are underweight central and eastern European (CEE) countries, including Czech Republic, Hungary, and Poland. The region's government bond prices have risen in recent months along with core eurozone bonds and currently offer little further value, in our view.
  • As we continue to seek attractive, risk-adjusted relative value, we expand our opportunity set beyond the benchmark. We continue to hold out-of-benchmark positions, including an allocation to Serbia.

Currency Selection

  • We hold overweight positions in currencies with stable underlying fundamentals and whose countries are undertaking structural reforms. We increased overweight exposures to both the Indonesian rupiah and Indian rupee during the period.�
  • In Latin America, we maintained our exposure to the Mexican peso. We believe the country's strong current accounts and healthy foreign currency reserves can help the peso maintain stability despite geopolitical risks. We moderated an overweight to the Brazilian real as the country's loose monetary stance could reduce the currency's upside potential in the near term.
  • We see some CEE currencies as offering lower potential, such as Polish zloty and Hungarian forint. However, we are overweight the Czech koruna due to the Czech central bank's relatively hawkish stance, which creates the potential for outperformance.
  • The breadth of our research process allows us to evaluate currencies outside the benchmark where we see attractive opportunities. We continue to hold an off-benchmark position in the Egyptian pound and Serbian dinar.
  • The strategy retains a mix of developed and emerging market currency short positions in the Swiss franc, South Korean won, Singapore dollar, and Taiwanese dollar, which we use to fund our preferred overweight positions.

Sectors

Total
Sectors
6
Largest Sector Sovereign 93.19% Was (31-Jan-2020) 97.27%
Other View complete Sector Diversification

Monthly Data as of 29-Feb-2020

Indicative Benchmark: J.P. Morgan GBI - EM Global Diversified

Largest Overweight

Reserves
By4.31%
Fund 4.31%
Indicative Benchmark 0.00%

Largest Underweight

Sovereign
By-6.81%
Fund 93.19%
Indicative Benchmark 100.00%

Monthly Data as of 29-Feb-2020

30-Nov-2015 - Andrew Keirle, Portfolio Manager,
We maintain off-benchmark allocations to selected U.S. dollar-denominated and euro-denominated sovereign and quasi-sovereign bonds that hold attractive relative value.

Regions

Total
Regions
5
Largest Region Latin America 29.62% Was (31-Jan-2020) 29.95%
Other View complete Region Diversification

Monthly Data as of 29-Feb-2020

Indicative Benchmark: J.P. Morgan GBI - EM Global Diversified

Largest Overweight

Middle East & Africa
By4.40%
Fund 12.67%
Indicative Benchmark 8.27%

Largest Underweight

Emerging Europe
By-7.85%
Fund 24.04%
Indicative Benchmark 31.89%

Monthly Data as of 29-Feb-2020

Countries

Total
Countries
27
Largest Country South Africa 10.16% Was (31-Jan-2020) 10.99%
Other View complete Country Diversification

Monthly Data as of 29-Feb-2020

Indicative Benchmark: J.P. Morgan GBI - EM Global Diversified

Largest Overweight

India
By3.76%
Fund 3.76%
Indicative Benchmark 0.00%

Largest Underweight

Poland
By-4.41%
Fund 4.64%
Indicative Benchmark 9.04%

Monthly Data as of 29-Feb-2020

29-Feb-2020 - Andrew Keirle, Portfolio Manager,
Despite the near-term volatility, we maintain a long-term view with a preference for countries that are implementing economic reforms, such as South Africa and Brazil. However, we did moderately reduce our overweight positions in some countries to mitigate the impact from the ongoing volatility. We remain underweight central and eastern Europe countries, such as Poland and Czech Republic, where we see little value in current bond prices.

Currency

Total
Currencies
35
Largest Currency Mexican peso 11.61% Was (31-Jan-2020) 11.16%
Other View complete Currency Diversification

Monthly Data as of 29-Feb-2020

Indicative Benchmark : J.P. Morgan GBI - EM Global Diversified

Largest Overweight

Czech koruna
By 2.62%
Fund 6.88%
Indicative Benchmark 4.26%

Largest Underweight

U.S. dollar
By -9.66%
Fund -9.66%
Indicative Benchmark 0.00%

Monthly Data as of 29-Feb-2020

29-Feb-2020 - Andrew Keirle, Portfolio Manager,
We continued to selectively reduce our risk exposure to some EM currencies in February as the coronavirus-related volatility will likely weigh on EM currencies in the near term. However, like bond markets, we hold overweight and off-benchmark positions in currencies where countries are undertaking structural reforms and offer long-term value opportunities. We moderately added to an out-of-benchmark exposure to the Serbian dinar as the country continues to display stable fundamentals.

Team (As of 31-Mar-2020)

Andrew Keirle

Andrew Keirle is a senior portfolio manager in the Fixed Income Division and a member of the Global Fixed Income Investment Team. Mr. Keirle is the lead portfolio manager for the Emerging Markets Local Currency Bond Strategy and has important input on a number of emerging markets bond strategies and global fixed income strategies. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Keirle has 23 years of investment experience, 14 of which have been with T. Rowe Price. Prior to joining the firm in 2005, he was a portfolio manager and analyst at Lazard Asset Management. Prior to joining Lazard, Mr. Keirle spent seven years as a global portfolio manager at Gulf International Bank in London.

Mr. Keirle is a qualified member of the Institute of Investment Management and Research, and he also holds a diploma from the Society of Technical Analysts. He graduated with a B.Sc. in economics and politics from the University of Swansea at the University of Wales.

  • Fund manager
    since
    2012
  • Years at
    T. Rowe Price
    14
  • Years investment
    experience
    23

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class I $2,500,000 $100,000 $0 0.00% 65 basis points 0.75%
Class Q $15,000 $100 $100 0.00% 65 basis points 0.82%
Class Sd $10,000,000 $0 $0 0.00% 0 basis points 0.10%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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