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SICAV

Emerging Local Markets Bond Fund

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

ISIN LU1629937985 Bloomberg TRPELBI:LX

Since Inception Annualised
(View Total Returns)

Total Assets
(USD)

2.77%
$84.7m

1YR Return
(View Total Returns)

Manager Tenure

17.64%
2yrs

Information Ratio

Tracking Error

N/A
N/A

Inception Date 16-Jun-2017

Performance figures calculated in EUR

Other Literature

31-Oct-2019 - Andrew Keirle, Portfolio Manager,
We are optimistic about the outlook for emerging market local currency assets. Global central banks are likely to remain accommodative, and economic growth could improve. If the U.S. and China agree on a trade pact, EM assets could rally further. However, we remain aware of the risks if trade talks deteriorate or other potential negative geopolitical events weaken the economic outlook.
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 heading into the final quarter of 2019. The asset class remains one of the highest-yielding opportunities in the fixed income market. Valuations against other asset classes are also attractive.

The technical backdrop should remain supportive in the near term, helped by positive cyclical flows into EM asset classes. The accommodative stances by major developed market central banks should help contain global yields, keeping demand for EM bonds strong. Many EM central banks have already started cutting rates, and the benign inflation environment should provide the flexibility to continue easing if needed. 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. This could improve the opportunities among emerging market currencies.

Global macro risks also remain areas to watch. Although the U.S.-China trade negotiations remain an ongoing risk, there is optimism that talks could produce a truce between the U.S. and China and prevent further tariff increases. An increase in fiscal or monetary stimulus in China would provide an additional boost to EM assets, but the country's authorities have so far remained focused on deleveraging.

Despite the wider growth concerns, fundamentals remain broadly supportive in emerging countries, including stable underlying economic growth, more disciplined government spending, largely balanced current accounts, and rational economic policy in most major markets. Should the looser monetary policy outlook translate into improved growth, EM local asset prices would likely rally further. Additionally, we see the potential for more fiscal stimulus globally, which would support EM assets.

Despite these positives, the mixed economic outlook alongside a handful of idiosyncratic concerns within EM mean that investors need to remain selective. We are focused on idiosyncratic opportunities with positive reform momentum and stable fundamentals that can perform in different market conditions.

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 | EUR)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 17.64% N/A N/A 2.77%
Indicative Benchmark % 17.39% N/A N/A 3.48%
Excess Return % 0.25% N/A N/A -0.71%

Inception Date 16-Jun-2017

Indicative Benchmark: Linked Benchmark

Data as of  31-Oct-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 16.76% N/A N/A 2.54%
Indicative Benchmark % 17.34% N/A N/A 3.37%
Excess Return % -0.58% N/A N/A -0.83%

Inception Date 16-Jun-2017

Indicative Benchmark: Linked Benchmark

Data as of  30-Sep-2019

Performance figures calculated in EUR

Recent Performance

  Month to DateData as of 15-Nov-2019 Quarter to DateData as of 15-Nov-2019 Year to DateData as of 15-Nov-2019 1 MonthData as of 31-Oct-2019 3 MonthsData as of 31-Oct-2019
Fund % -0.19% 0.57% 13.66% 0.76% 0.66%
Indicative Benchmark % 0.01% 0.56% 13.73% 0.55% 0.94%
Excess Return % -0.20% 0.01% -0.07% 0.21% -0.28%

Inception Date 16-Jun-2017

Indicative Benchmark: Linked Benchmark

Indicative Benchmark: Linked Benchmark

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.

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.

31-Oct-2019 - Andrew Keirle, Portfolio Manager,
Emerging market local currency bonds posted positive returns in October amid a favourable backdrop for risk assets globally. Optimism that the U.S. and China were progressing towards a trade deal in the initial phase of negotiations supported emerging markets. In the portfolio, our overweight exposure to Brazilian government bonds contributed positively. The country’s markets received a boost when the senate passed pension reform legislation, which is expected to reduce the country’s budget deficit. Our overweight in Indonesia also helped performance. Our underweight in Turkey held back relative gains, however, as an improving inflation outlook in the country as well as the wider positive backdrop for emerging markets helped Turkish bonds perform well. Turning to currencies, our overweight in the Czech koruna boosted performance. Improvements in European economic data helped the currency rebound from recent weakness. A long-held off-benchmark exposure in the Serbian dinar also contributed to our performance.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 70.83% Was (30-Sep-2019) 68.16%
Other View Top 10 Issuers

Monthly data as of 31-Oct-2019

Holdings

Total
Holdings
104
Largest Holding Brazil Notas do Tesouro Nacional Serie F 4.04% Was (30-Jun-2019) 4.41%
Top 10 Holdings 29.51%
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 % 5.31% -7.68%
Fund 6.59% 23.38%
Indicative Benchmark 1.28% 31.06%

Average Credit Quality

BBB

Monthly Data as of 31-Oct-2019
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 % 16.56% -15.14%
Fund 38.18% 10.37%
Indicative Benchmark 21.62% 25.51%

Weighted Average Duration

5.31 Years

Monthly Data as of 31-Oct-2019
Indicative Benchmark:  J.P. Morgan GBI - EM Global Diversified

30-Sep-2019 - Andrew Keirle, Portfolio Manager,

Bond Allocation

  • Our portfolio holds overweight positions in countries with the potential to maintain or ease monetary policy stances amid subdued inflation, such as Brazil where we added to an overweight exposure during the quarter. We also retained an overweight to Mexico.
  • In Asia, we held our out-of-benchmark exposure to Sri Lanka amid contained inflation and attractive real yields. We also retained an overweight to India.
  • In emerging Europe, we initiated an overweight to Russia during the period due to a supportive fiscal position and rising expectations of an extended rate cutting cycle. We remain underweight 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, such as the Indonesian rupiah. We also opened an overweight in the Indian rupee during the period.��
  • Elsewhere in Asia, we moderated our overweight to the Philippines peso during the quarter by taking some profits after its strong performance this year.
  • In Latin America, we added to an overweight exposure in 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 also maintained an overweight to the Brazilian real. Conversely, we closed our overweight to the Argentinean peso during the period as we see the policy uncertainty in the coming months as a potential source of further volatility.
  • 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. Primary surpluses paired with solid growth has improved Egypt's debt dynamics, significantly reducing its debt/gross domestic product ratio recently. We also maintained our off-benchmark exposure to the Nigerian naira, Serbian dinar, and Sri Lankan rupee.
  • 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 94.68% Was (30-Sep-2019) 92.27%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2019

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

Largest Overweight

Quasi-Sovereign
By1.67%
Fund 1.67%
Indicative Benchmark 0.00%

Largest Underweight

Sovereign
By-5.32%
Fund 94.68%
Indicative Benchmark 100.00%

Monthly Data as of 31-Oct-2019

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 Asia 32.26% Was (30-Sep-2019) 31.48%
Other View complete Region Diversification

Monthly Data as of 31-Oct-2019

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

Largest Overweight

Asia
By6.59%
Fund 32.26%
Indicative Benchmark 25.67%

Largest Underweight

Emerging Europe
By-9.48%
Fund 22.68%
Indicative Benchmark 32.16%

Monthly Data as of 31-Oct-2019

Countries

Total
Countries
27
Largest Country Indonesia 11.26% Was (30-Sep-2019) 10.55%
Other View complete Country Diversification

Monthly Data as of 31-Oct-2019

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

Largest Overweight

India
By3.07%
Fund 3.07%
Indicative Benchmark 0.00%

Largest Underweight

Poland
By-5.41%
Fund 3.35%
Indicative Benchmark 8.76%

Monthly Data as of 31-Oct-2019

31-Oct-2019 - Andrew Keirle, Portfolio Manager,
We maintain a preference for countries that are implementing economic reforms, such as Serbia and South Africa. We also maintained our overweight in Brazil, where continued progress on structural reforms should support local markets. We also added to our overweight in Mexico. Elsewhere, we increased our overweight position in India as we see potential for accommodative monetary policy. Conversely, we added to our underweight in Poland where bond yields offer relatively low value and an improvement in the European economy could weigh on bond prices across the region.

Currency

Total
Currencies
36
Largest Currency Indonesian rupiah 11.52% Was (30-Sep-2019) 10.88%
Other View complete Currency Diversification

Monthly Data as of 31-Oct-2019

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

Largest Overweight

Serbia dinar
By 2.02%
Fund 2.02%
Indicative Benchmark 0.00%

Largest Underweight

New Taiwan dollar
By -3.25%
Fund -3.25%
Indicative Benchmark 0.00%

Monthly Data as of 31-Oct-2019

31-Oct-2019 - Andrew Keirle, Portfolio Manager,
Similar to bond markets, we hold overweight and off-benchmark positions in currencies where countries are undertaking structural reforms and we see upside potential. Conversely, we are underweight currencies we view as having limited relative value. We added to our overweight exposure in the Indonesian rupiah, which could benefit following the improvement in U.S.-China trade relations. Elsewhere we hold an overweight in the Egyptian pound as we see positive long-term structural reforms continuing.

Team (As of 31-Aug-2019)

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
    2017
  • Years at
    T. Rowe Price
    14
  • Years investment
    experience
    23

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 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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