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SICAV

Emerging Markets Bond Fund

Active investment in mainly sovereign emerging-market bonds.

ISIN LU1438968627 WKN A2ANJB

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

-3.45%
$289.5m

1YR Return
(View Total Returns)

Manager Tenure

-10.25%
3yrs

Information Ratio
(3 Years)

Tracking Error
(3 Years)

-0.99
3.97%

Inception Date 30-Jun-2016

Performance figures calculated in EUR

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30-Apr-2020 - Michael Conelius, Portfolio Manager,
The recent global sell-off in risk assets brought on by the coronavirus pandemic, an oil supply shock, and market illiquidity has led to historically cheap valuations in emerging markets debt. While we believe a global slowdown and health care crises will inevitably weigh on fundamentals in emerging markets, and some more fragile countries are likely to remain impaired, most countries should weather the storm and ultimately have the potential to generate outsized returns given today’s valuations.
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

The recent global sell-off in risk assets brought on by the coronavirus pandemic, an oil supply shock, and market illiquidity has led to historically cheap valuations in emerging markets debt. While a global slowdown and health care crises will inevitably weigh on fundamentals in emerging markets and some more fragile countries are likely to remain impaired, most countries should weather the storm (some with the support of the IMF) and will ultimately generate outsized returns given today's valuations. We are also encouraged by recent fiscal and monetary steps taken by developed and emerging markets to support an eventual rebound in confidence. Furthermore, the high carry provided by EM debt should attract investors in an environment of record-low developed market yields once markets gain some equilibrium.

Because of these factors, we are positioning the portfolio for a rebound. We are gradually adding risk and aim to comfortably out-carry the benchmark. To do so, we are keeping sizable allocations to more liquid, favored countries that offer reasonable carry and the opportunity for spread compression and medium-term credit improvement. We are also focused on our highest-conviction, high yield frontier names that have been excessively punished, such as Ukraine and Ghana. These are funded by holding small or zero allocations to still weaker frontier markets. We are also finding attractive value in oversold quasi-sovereigns and select corporates in mainstream markets that offer large yield premiums over their respective sovereign.

On the other hand, we have reduced exposure to more structurally vulnerable names, such as Turkey and South Africa. We are also maintaining our structural underweight to low-beta countries. We are comfortable being underweight Saudi Arabia and the long-duration Gulf Cooperation Council states, as we are concerned that massive fiscal and monetary stimulus will eventually drive up U.S. rates. In China, we continue to see limited relative value from most very low spread quasi-sovereign issuers. In Russia, we remain underweight but have added on the margin in recent months.

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 A | EUR)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % -10.25% -3.45% N/A -0.05%
Indicative Benchmark % -2.77% 0.47% N/A 2.25%
Excess Return % -7.48% -3.92% N/A -2.30%

Inception Date 30-Jun-2016

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

Data as of  30-Apr-2020

Performance figures calculated in EUR

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % -12.11% -4.24% N/A -0.54%
Indicative Benchmark % -4.66% -0.43% N/A 1.65%
Excess Return % -7.45% -3.81% N/A -2.19%

Inception Date 30-Jun-2016

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

Data as of  31-Mar-2020

Performance figures calculated in EUR

Recent Performance

  Month to DateData as of 29-May-2020 Quarter to DateData as of 29-May-2020 Year to DateData as of 29-May-2020 1 MonthData as of 30-Apr-2020 3 MonthsData as of 30-Apr-2020
Fund % 3.51% 5.41% -11.78% 1.84% -17.32%
Indicative Benchmark % N/A N/A N/A 2.43% -11.74%
Excess Return % N/A N/A N/A -0.59% -5.58%

Inception Date 30-Jun-2016

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 EUR

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.

30-Apr-2020 - Michael Conelius, Portfolio Manager,
Emerging markets debt advanced in April, stabilising after sharp declines in March. The economic effects of measures to contain the coronavirus began to appear, while optimism for recoveries emerged as some governments began to ease lockdowns amid signs that the pandemic had peaked in some areas, leading to periods of increased investor risk appetite. Within the portfolio, our holdings in Venezuela hindered relative performance. The defaulted bonds rarely trade and moved lower amid low oil prices. Our out-of-benchmark position in the Bahamas also worked against the portfolio. Tourism revenue is projected to decline sharply, and the sovereign was downgraded by S&P. In contrast, our positioning in China supported relative performance. Our underweight allocation to the lower-yielding country and selection of higher-yielding Chinese property developers outperformed. Security selection in Ecuador was also beneficial as our positions in intermediate-maturity sovereigns outperformed.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 31.49% Was (31-Mar-2020) 30.40%
Other View Top 10 Issuers

Monthly data as of 30-Apr-2020

Holdings

Total
Holdings
182
Largest Holding Petrobras Global Finance BV 4.38% Was (31-Dec-2019) 4.04%
Top 10 Holdings 21.97%
Other View Full Holdings Quarterly data as of 31-Mar-2020

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating Reserves A
By % 13.82% -13.24%
Fund 13.82% 3.32%
Indicative Benchmark 0.00% 16.56%

Average Credit Quality

BB-

Monthly Data as of 30-Apr-2020
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 Cash Equivalents 3-5 Years
By % 14.36% -6.42%
Fund 14.36% 9.95%
Indicative Benchmark 0.00% 16.37%

Weighted Average Maturity

12.81 Years

Monthly Data as of 30-Apr-2020
Indicative Benchmark:  J.P. Morgan Emerging Markets Bond Index Global Diversified

Duration View duration analysis

  Largest Overweight Largest Underweight
Duration Cash Equivalents 1-3 Years
By % 13.82% -12.60%
Fund 13.82% 4.53%
Indicative Benchmark 0.00% 17.13%

Weighted Average Duration

6.82 Years

Monthly Data as of 30-Apr-2020
Indicative Benchmark:  J.P. Morgan Emerging Markets Bond Index Global Diversified

31-Mar-2020 - 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 and maintains implicit sovereign support. We also added to corporate debt from issuers in consumer-oriented sectors that benefit from domestic economic recovery.

Mexico

Mexico remains an overweight in the portfolio. We do not hold any sovereign debt, but we find attractive relative value in quasi-sovereigns Petroleos Mexicanos and Mexico City Airport Trust and the deep corporate market as these issuers provide an attractive yield premium over the sovereign. �

Bahamas

We have added to our out-of-benchmark position in the Bahamas. The high-quality sovereign is supported by strong fundamentals and provides some defensive qualities as it is less widely held.

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

The Philippines

We remain underweight the Philippines as its external debt provides generally uninspiring relative value due to its lower yields.

China

China remains a significant underweight. China's external debt consists largely of low-yielding, quasi-sovereign issuers with limited transparency and generally uninspiring relative value.

Saudi Arabia, United Arab Emirates, and Qatar

Saudi Arabia, the United Arab Emirates, and Qatar are recent additions to the benchmark, and we have deliberately not kept up with their growing weight in the index. In the last quarter, however, we slightly increased our exposure to this defensive area of the market. We added to Saudi Arabian quasi-sovereign Aramco and initiated a small position in Qatar government bonds. Our underweight to these higher-quality, low-yielding sovereigns is consistent with our structural underweight to such countries.

Sectors

Total
Sectors
4
Largest Sector Sovereign 51.65% Was (31-Mar-2020) 49.88%
Other View complete Sector Diversification

Monthly Data as of 30-Apr-2020

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

Largest Overweight

Corporate
By20.62%
Fund 20.62%
Indicative Benchmark 0.00%

Largest Underweight

Sovereign
By-30.59%
Fund 51.65%
Indicative Benchmark 82.24%

Monthly Data as of 30-Apr-2020

30-Apr-2020 - Michael Conelius, Portfolio Manager,
We are finding value in oversold quasi-sovereign issuers and select corporates in mainstream markets that offer large yield premiums over their respective sovereign. Our corporate exposure has increased slightly this quarter. We brought down our small local currency exposure to close to zero over the quarter, as emerging market currencies are likely to remain volatile in the near term.

Countries

Total
Countries
52
Largest Country Brazil 12.23% Was (31-Mar-2020) 13.30%
Other View complete Country Diversification

Monthly Data as of 30-Apr-2020

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

Largest Overweight

Brazil
By9.11%
Fund 12.23%
Indicative Benchmark 3.12%

Largest Underweight

Philippines
By-3.10%
Fund 0.36%
Indicative Benchmark 3.46%

Monthly Data as of 30-Apr-2020

30-Apr-2020 - Michael Conelius, Portfolio Manager,
We are positioning the portfolio for a potential rebound and are gradually adding risk. We are focused on high-conviction frontier names that we believe have been excessively punished, such as Ukraine and Ghana. On the other hand, we have reduced exposure to more structurally vulnerable names, such as Turkey and South Africa. We maintain our structural underweight to low-beta countries, such as Russia, China, and the Gulf States.

Currency

Total
Currencies
6
Largest Currency U.S. dollar 100.68% Was (31-Mar-2020) 99.73%
Other View complete Currency Diversification

Monthly Data as of 30-Apr-2020

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

Largest Overweight

U.S. dollar
By 0.68%
Fund 100.68%
Indicative Benchmark 100.00%

Largest Underweight

euro
By -0.47%
Fund -0.47%
Indicative Benchmark 0.00%

Monthly Data as of 30-Apr-2020

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 21-May-2020)

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
    2016
  • Years at
    T. Rowe Price
    32
  • Years investment
    experience
    32

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 A $1,000 $100 $100 5.00% 125 basis points 1.42%
Class I $2,500,000 $100,000 $0 0.00% 65 basis points 0.73%
Class Q $1,000 $100 $100 0.00% 65 basis points 0.81%
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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