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SICAV

Emerging Markets Bond Fund

Active investment in mainly sovereign emerging-market bonds.

ISIN LU0207127753 WKN A0DP3A

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

4.16%
$562.9m

1YR Return
(View Total Returns)

Manager Tenure

11.16%
14yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.14
2.33%

Inception Date 31-Dec-2004

Performance figures calculated in USD

Other Literature

31-Oct-2019 - Michael Conelius, Portfolio Manager,
Uncertainty has weighed on markets recently, driving up volatility. Concerns about slowing global growth, uncertain monetary policy, inflated equity market valuations, trade wars, and geopolitical risks, have all made markets jittery. While emerging markets are not insulated from the global risk environment, we remain cautiously optimistic on the asset class as it offers one of the highest yielding opportunities in the fixed income market and credit fundamentals remain generally healthy.
Michael J.  Conelius
Michael J. Conelius, Portfolio Manager

Michael Conelius is a portfolio manager in the Fixed Income Division at T. Rowe Price. Mr. Conelius is lead manager of T. Rowe Price's Emerging Markets Bond Strategy. He is a vice president of T. Rowe Price Group, Inc., T. Rowe Price Associates, Inc., and T. Rowe Price International Ltd.

Click for Manager Outlook
 

Strategy

Manager's Outlook

After a very strong start to the year, emerging markets debt returns were more subdued in the third quarter. Concerns about slowing global growth, questionable monetary policy, inflated equity market valuations, trade wars, and geopolitical uncertainty, resulted in a bifurcated market, with more defensive investment grade issuers rallying while high yield credits sold off.

While emerging markets are not insulated from the global risk environment, we remain cautiously optimistic on the asset class as it offers one of the highest yielding opportunities in the fixed income market and credit fundamentals remain generally healthy. Despite a strong rally early in the year, spreads remain at reasonable levels relative to history with yields of over 5%-three times those of Treasuries. This income provides a substantial buffer from market corrections and offers materially better carry than most comparable developed markets bonds. Also, there is a silver lining to the mixed global risk environment - a more dovish Fed has given emerging markets room for easier monetary policy spurring EM growth.

Fundamentals remain broadly supportive, including stable underlying economic growth, more disciplined government spending, largely balanced current accounts, and rational economic policy in most major markets. In the near term, we think aforementioned exogenous macro risks along with several idiosyncratic factors within EM will likely be the key drivers through year end, including China (trade war and domestic fiscal stimulus), Argentina (path of debt restructuring and fiscal policy under a new government), and the speed and magnitude of monetary easing in major economies.

We are somewhat cautiously positioned, focusing on idiosyncratic opportunities with positive reform momentum, such as Brazil and South Africa as well as smaller markets that are underpriced relative to their fundamental risks (Ukraine, Sri Lanka) or offer diversification benefits (Jamaica, Serbia). We are overweight select quasi-sovereign companies that benefit from reforms and offer attractive carry pickup versus the sovereign, including Eskom and Petrobras. We have also added to our corporate exposure on more attractive relative value, focusing on consumer-oriented companies in higher-quality markets. Despite their strong recent performance, we maintained our structural underweight to low yielding investment grade countries including China and the Gulf states.

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.

Investment Approach

  • Focus primarily on sovereign debt.
  • Integrate proprietary credit research and relative value analysis.
  • Establish independent credit rating at the country and corporate issuer level.
  • Add value through active country allocation and individual security selection decisions.
  • Limit risk through diversification.
  • Employ long-term investment horizon.

Portfolio Construction

  • Diversified portfolio structure: typically 200-300 securities
  • Duration bands: managed within +/- 1 year of the benchmark
  • Average credit quality: BB
  • Country exposure will range between 0% and 10%
  • Expected 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 % 11.16% 4.16% 5.11% 6.27% 6.62%
Indicative Benchmark % 14.35% 5.14% 5.44% 6.90% 7.24%
Excess Return % -3.19% -0.98% -0.33% -0.63% -0.62%

Inception Date 31-Dec-2004

Manager Inception Date 31-Dec-2004

Indicative Benchmark: J.P. Morgan Emerging Markets Bond Index Global Diversified

Data as of  31-Oct-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 7.51% 3.70% 5.14% 6.27%
Indicative Benchmark % 11.57% 4.61% 5.74% 6.88%
Excess Return % -4.06% -0.91% -0.60% -0.61%

Inception Date 31-Dec-2004

Indicative Benchmark: J.P. Morgan Emerging Markets Bond Index Global Diversified

Data as of  30-Sep-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 18-Nov-2019 Quarter to DateData as of 18-Nov-2019 Year to DateData as of 18-Nov-2019 1 MonthData as of 31-Oct-2019 3 MonthsData as of 31-Oct-2019
Fund % -0.42% 0.08% 10.74% 0.50% -1.22%
Indicative Benchmark % -0.68% -0.40% 12.54% 0.28% 0.57%
Excess Return % 0.26% 0.48% -1.80% 0.22% -1.79%

Inception Date 31-Dec-2004

Indicative Benchmark: J.P. Morgan Emerging Markets Bond Index Global Diversified

Indicative Benchmark: J.P. Morgan Emerging Markets Bond Index Global Diversified

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.

31-Oct-2019 - Michael Conelius, Portfolio Manager,
Emerging markets debt generated modest returns in October. Concerns about potential weakness in global growth stemming from trade disputes and increased geopolitical tensions remained, yet investors sought higher yields amid persistently low global rates. Within the portfolio, our lack of exposure to Lebanon was beneficial. Anti-government and corruption protests were widespread, which led to the prime minister’s resignation. The heavily indebted sovereign faces pressure to reform. Our overweight allocation to Mexico, as well as security selection within the country, contributed further to relative performance. Here, our positions in state-owned oil company PEMEX and the Mexico City Airport Trust were positive. Conversely, our overweight allocation to Venezuela held back relative returns. The distressed country’s bonds declined amid pricing write-downs by the index, as it lowered Venezuela’s weight by reducing prices. Our overweight to Ecuador also hurt relative performance. After making progress on reforms to reduce its fiscal deficit, Ecuador came under pressure amid violent protests. The government reversed cuts to fuel subsidies, making it more difficult to meet deficit targets in its IMF programme.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 39.84% Was (30-Sep-2019) 38.65%
Other View Top 10 Issuers

Monthly data as of 31-Oct-2019

Holdings

Total
Holdings
258
Largest Holding Petrobras Global Finance BV 3.90% Was (30-Jun-2019) 3.55%
Top 10 Holdings 19.69%
Other View Full Holdings Quarterly data as of 30-Sep-2019

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating B A
By % 10.67% -12.83%
Fund 36.53% 4.68%
Indicative Benchmark 25.86% 17.51%

Average Credit Quality

BB-

Monthly Data as of 31-Oct-2019
Indicative Benchmark:  J.P. Morgan Emerging Markets Bond Index 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.

Maturity View maturity analysis

  Largest Overweight Largest Underweight
Maturity 5-7 Years 10+ Years
By % 7.00% -11.23%
Fund 21.51% 24.94%
Indicative Benchmark 14.51% 36.17%

Weighted Average Maturity

10.67 Years

Monthly Data as of 31-Oct-2019
Indicative Benchmark:  J.P. Morgan Emerging Markets Bond Index Global Diversified

Duration View duration analysis

  Largest Overweight Largest Underweight
Duration 5-7 Years 1-3 Years
By % 11.25% -5.74%
Fund 32.15% 8.83%
Indicative Benchmark 20.90% 14.57%

Weighted Average Duration

7.56 Years

Monthly Data as of 31-Oct-2019
Indicative Benchmark:  J.P. Morgan Emerging Markets Bond Index Global Diversified

30-Sep-2019 - Michael Conelius, Portfolio Manager,

We are overweight countries pursuing reform agendas that target long-term growth.

Brazil

Brazil remains our largest overweight. We added to our overweight throughout the quarter, with a preference for bonds from quasi-sovereign oil company Petrobras as the company continues to improve its credit profile. We are also invested in sovereign debt as well as corporate debt from several issuers in the consumer-oriented sectors that benefit from domestic economic recovery.

South Africa

We added to our overweight position in South Africa with positions favoring quasi-sovereign utility company Eskom. Reform momentum could increase following the reelection of President Ramaphosa and his appointment of new cabinet members. The country's assets offer attractive relative value.

Ukraine

Ukraine has grown into a meaningful overweight. Recent elections led to a majority for President Volodimyr Zelensky's party, creating a strong mandate for reform and commitment to the IMF program. Inflation has been falling, and growth has ticked up.

We remain underweight countries that offer limited risk-adjusted return potential.

Russia

We maintained the fund's underweight allocation to Russia. Despite a conservative fiscal policy, solid credit metrics, and support from recovering oil prices, we remain cautious on the country due to the persisting risk of additional sanctions.

United Arab Emirates, Saudi Arabia, and Qatar

United Arab Emirates, Saudi Arabia, and Qatar are recent additions to the benchmark and our positioning has not kept up with their gradual inclusions. Our underweight to these higher-quality, low-yielding sovereigns is consistent with our structural underweight to such countries.

Philippines

The Philippines is a notable underweight, primarily due to the unattractive relative value of its external sovereign debt. The country is supported by strong local ownership causing it to consistently trade rich to peers.

Sectors

Total
Sectors
5
Largest Sector Sovereign 63.87% Was (30-Sep-2019) 63.35%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2019

Indicative Benchmark: J.P. Morgan Emerging Markets Bond Index Global Diversified

Largest Overweight

Corporate
By17.72%
Fund 17.72%
Indicative Benchmark 0.00%

Largest Underweight

Sovereign
By-18.24%
Fund 63.87%
Indicative Benchmark 82.11%

Monthly Data as of 31-Oct-2019

31-Oct-2019 - Michael Conelius, Portfolio Manager,
Fundamentals, such as stable underlying economic growth, remain broadly supportive. In the near term, we think macroeconomic risks along with several idiosyncratic factors within emerging markets will likely be the key drivers through to the end of this year. We are overweight select quasi-sovereign companies, including Eskom and Petrobras, that will likely benefit from reforms and offer attractive carry pickup versus the sovereign. We have also added to our corporate exposure on more attractive relative value, focussing on consumer-oriented companies in higher-quality markets.

Countries

Total
Countries
54
Largest Country Brazil 11.61% Was (30-Sep-2019) 11.16%
Other View complete Country Diversification

Monthly Data as of 31-Oct-2019

Indicative Benchmark: J.P. Morgan Emerging Markets Bond Index Global Diversified

Largest Overweight

Brazil
By8.61%
Fund 11.61%
Indicative Benchmark 3.00%

Largest Underweight

Russia
By-3.32%
Fund 0.00%
Indicative Benchmark 3.32%

Monthly Data as of 31-Oct-2019

31-Oct-2019 - Michael Conelius, Portfolio Manager,
We are somewhat cautiously positioned, focussing on idiosyncratic opportunities with positive reform momentum, such as Brazil and South Africa, as well as smaller markets that are underpriced relative to their fundamental risks (Ukraine, Sri Lanka) or offer diversification benefits (Jamaica, Serbia). Despite their strong recent performance, we maintained our structural underweight to low yielding investment grade countries including China and the Gulf states.

Currency

Total
Currencies
13
Largest Currency U.S. dollar 99.39% Was (30-Sep-2019) 99.90%
Other View complete Currency Diversification

Monthly Data as of 31-Oct-2019

Indicative Benchmark : J.P. Morgan Emerging Markets Bond Index Global Diversified

Largest Overweight

Brazilian real
By 0.52%
Fund 0.52%
Indicative Benchmark 0.00%

Largest Underweight

U.S. dollar
By -0.61%
Fund 99.39%
Indicative Benchmark 100.00%

Monthly Data as of 31-Oct-2019

31-Oct-2015 - Michael Conelius, Portfolio Manager,
Given our expectations for continued U.S. dollar strength, we maintained a low and defensive level of non-benchmark currency exposure.

Team (As of 31-Aug-2019)

Michael J.  Conelius

Michael Conelius is a portfolio manager in the Fixed Income Division at T. Rowe Price. Mr. Conelius is lead manager of T. Rowe Price's Emerging Markets Bond Strategy. He is a vice president of T. Rowe Price Group, Inc., T. Rowe Price Associates, Inc., and T. Rowe Price International Ltd.

Mr. Conelius has 31 years of investment experience, all of them at T. Rowe Price. Prior to joining the firm in 1988, he was a consultant for Booz Allen Hamilton.

Mr. Conelius earned a B.S. in finance from Towson University and an M.S. in finance from Loyola University Maryland. Mr. Conelius has also earned the Chartered Financial Analyst designation.

  • Fund manager
    since
    2004
  • Years at
    T. Rowe Price
    31
  • Years investment
    experience
    31

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $15,000 $100 $100 5.00% 125 basis points 1.42%
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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