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T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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SICAV

Emerging Markets Bond Fund

Active investment in mainly sovereign emerging-market bonds.

ISIN LU0207127753 Bloomberg TRPGEBI:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

4.79%
$241.4m

1YR Return
(View Total Returns)

Manager Tenure

7.54%
1yr

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.29
3.39%

Inception Date 31-Dec-2004

Performance figures calculated in USD

31-Oct-2021 - Samy Muaddi, Portfolio Manager ,
Potential U.S. Treasury rates volatility combined with absolute valuations below historic averages are cause for caution. However, the relative value of emerging markets (EM) debt versus other asset classes is still compelling. EM debt’s yield premium remains intact, and we believe the coupon compounding opportunity combined with a benign default outlook will likely continue to attract investors.
Samy Muaddi, CFA
Samy Muaddi, CFA, Portfolio Manager

Samy Muaddi is a portfolio manager in the International Fixed Income Division. He is the portfolio manager of the Emerging Markets Bond Strategy and co-manages the Emerging Markets Corporate Bond and Global High Income Bond Strategies. He previously managed the firm’s Asia Credit Bond Strategy from its inception until 2020. Samy also 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

EM debt produced negative total returns during the quarter as both spread and base rate movements were headwinds. EM credit spreads widened early in the quarter as the spread of the delta variant of the coronavirus weighed on economic recoveries and risk sentiment. Toward the end of the quarter, U.S. Treasury yields increased amid growing tapering expectations and inflation concerns.

Exogenous risks are our primary concern in EM debt today. The potential for further U.S. Treasury rates volatility combined with absolute valuations below historic averages are cause for caution. In addition, value dispersion across markets in the asset class is relatively limited, hampering our ability to exploit mispricing.

In terms of fundamentals, fiscal conditions remain stressed in some markets due to the coronavirus pandemic although peak government spending is behind us in most of EM. Vaccination rates are catching up to developed market rates, though growth recoveries are slowing in some markets as inflation pressures build and the monetary policy trajectory is now less accommodative for growth.

However, the relative value of emerging markets debt versus other asset classes is still compelling. EM debt's yield premium remains intact, and the coupon compounding opportunity combined with a benign default outlook will likely continue to attract investors. Even so, we have been steadily reducing both absolute and active risk in the portfolio in recent months in anticipation of a dislocation.

Our risk reduction has come primarily via reducing aggregate frontier market exposure, though we maintain overweight positions in favored frontiers, such as Oman, Angola, and Egypt. We have also reduced positions in more vulnerable markets in the middle of the risk distribution, such as South Africa and Turkey. We see opportunities elsewhere, however. Policy conditions in China are testing the most indebted issuers, but we see wide-spread, long-term benefits to the current regulatory cycle. We are taking advantage of recent market weakness and see improved value in the China property sector and China high yield broadly. We maintain our structural underweight to low-beta, investment-grade countries such as Malaysia, Peru, and the high-quality Gulf States, but have recently found improved relative value in other investment-grade markets, such as Russia and Indonesia.

At the sector level, we continue to find value in quasi-sovereigns and corporates in higher-quality mainstream markets such as Mexico that offer yield premiums over the sovereign.

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.
  • Environmental, social and governance ("ESG") factors with particular focus on those considered most likely to have a material impact on the performance of the holdings or potential holdings in the funds’ portfolio are assessed. These ESG factors, which are incorporated into the investment process alongside financials, valuation, macro-economics and other factors, are components of the investment decision. Consequently, ESG factors are not the sole driver of an investment decision but are instead one of several important inputs considered during investment analysis.

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

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Fund % 7.54% 4.79% 3.19% 4.64% -0.56%
Indicative Benchmark % 4.41% 6.43% 4.15% 5.35% 0.02%
Excess Return % 3.13% -1.64% -0.96% -0.71% -0.58%

Inception Date 31-Dec-2004

Manager Inception Date 30-Sep-2021

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

Data as of 31-Oct-2021

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 8.15% 4.00% 3.13% 5.23%
Indicative Benchmark % 4.36% 5.65% 3.89% 5.80%
Excess Return % 3.79% -1.65% -0.76% -0.57%

Inception Date 31-Dec-2004

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

Data as of 30-Sep-2021

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 26-Nov-2021 Quarter to DateData as of 26-Nov-2021 Year to DateData as of 26-Nov-2021 1 MonthData as of 31-Oct-2021 3 MonthsData as of 31-Oct-2021
Fund % -2.31% -2.86% -2.97% -0.56% -1.22%
Indicative Benchmark % -1.93% -1.91% -3.24% 0.02% -1.09%
Excess Return % -0.38% -0.95% 0.27% -0.58% -0.13%

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.

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

31-Oct-2021 - Samy Muaddi, Portfolio Manager ,
EM debt produced flat total returns in October. Rising inflation and concerns that supply chain disruptions could impede economic recoveries led to yield curve flattening. Ongoing demand for yield and elevated commodities prices provided support for EM assets despite slightly wider credit spreads. Within the portfolio, selection of higher-yielding Chinese property developers weighed on performance amid weakness in the sector due to liquidity concerns. Out-of-benchmark holdings in Venezuela were also negative due to small movements at low dollar prices. Venezuelan bonds are sanctioned and largely do not trade, yet mark-to-market pricing is ongoing. The portfolio's out-of-benchmark allocation to the Bahamas aided relative results as it partially recovered from oversold levels. Following an election that led to a new prime minister, the government issued statements about its commitment to fiscal responsibility. An underweight allocation to Ghana was helpful. The heavily indebted sovereign underperformed amid softer revenues and high inflation.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 30.36% Was (30-Sep-2021) 30.08%
Other View Top 10 Issuers

Monthly data as of31-Oct-2021

Holdings

Total
Holdings
220
Largest Holding Oman Government International Bond 2.16% Was (30-Jun-2021) 2.27%
Top 10 Holdings 16.83%
Other View Full Holdings Quarterly data as of  30-Sep-2021

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating BB A
By % 13.62% -7.37%
Fund 32.31% 6.69%
Indicative Benchmark 18.69% 14.06%

Average Credit Quality

BB

Monthly Data as of  31-Oct-2021
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 7-10 Years 1-3 Years
By % 7.67% -5.89%
Fund 23.61% 6.93%
Indicative Benchmark 15.95% 12.82%

Weighted Average Maturity

12.96 Years

Monthly Data as of  31-Oct-2021
Indicative Benchmark:  J.P. Morgan Emerging Markets Bond Index Global Diversified

Duration View duration analysis

  Largest Overweight Largest Underweight
Duration 7-10 Years 1-3 Years
By % 3.88% -9.33%
Fund 20.85% 6.43%
Indicative Benchmark 16.98% 15.76%

Weighted Average Duration

8.29 Years

Monthly Data as of  31-Oct-2021
Indicative Benchmark: J.P. Morgan Emerging Markets Bond Index Global Diversified

30-Sep-2021 - Samy Muaddi, Portfolio Manager ,

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

Mexico

Mexico remains the portfolio's largest overweight. The economy is poised to benefit from strong U.S. growth, and we continue to find attractive relative value in the liquid investment-grade country, particularly in quasi-sovereign issuers Petroleos Mexicanos and Mexico City Airport Trust, though we trimmed holdings in both, locking in gains.

India

India grew to a significant overweight. Our holdings remain focused on quasi-sovereign Export-Import Bank, due to its attractive relative value, and corporate issuers. We also added to higher-quality Bharti Airtel.

Higher-Conviction Frontiers

We maintained our meaningful overweights to Oman and Angola as they offer higher yields and remain supported by elevated oil prices and fiscal reform efforts.

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

Malaysia, Panama, and Peru

Malaysia, Panama, and Peru's high credit ratings and low yields provide limited opportunities, and we see better relative value elsewhere.

Kazakhstan

We remain underweight Kazakhstan amid political changes. While this could be an indication that the country is moving to a more open economy, spreads are tight with limited upside and valuations versus similar oil-exporting peers are uninspiring.

South Africa

We are underweight South Africa and further reduced holdings on our analyst's conviction downgrade as spending pressures could increase already high debt levels.

Sectors

Total
Sectors
4
Largest Sector Sovereign 62.04% Was (30-Sep-2021) 60.34%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2021

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

Largest Overweight

Corporate
By21.08%
Fund 21.52%
Indicative Benchmark 0.44%

Largest Underweight

Sovereign
By-19.44%
Fund 62.04%
Indicative Benchmark 81.47%

Monthly Data as of 31-Oct-2021

31-Oct-2021 - Samy Muaddi, Portfolio Manager ,
We continue to find value in fundamentally attractive quasi-sovereigns and corporates in mainstream markets such as Mexico that offer yield premiums over the sovereign.

Countries

Total
Countries
58
Largest Country Mexico 10.04% Was (30-Sep-2021) 10.88%
Other View complete Country Diversification

Monthly Data as of 31-Oct-2021

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

Largest Overweight

Mexico
By5.09%
Fund 10.04%
Indicative Benchmark 4.96%

Largest Underweight

Malaysia
By-2.68%
Fund 0.00%
Indicative Benchmark 2.68%

Monthly Data as of 31-Oct-2021

31-Oct-2021 - Samy Muaddi, Portfolio Manager ,
We are buying into improved valuations in investment-grade mainstream markets, such as Indonesia and Russia. However, we are underweight both high yield Turkey and Brazil due to deteriorating credit profiles and institutional quality. In the frontier space, we remain overweight in select countries with improving macroeconomic and reform outlooks, such as Oman, Egypt, and Angola. In contrast, we are reducing our larger active weights and trimming more vulnerable issuers in this space. We maintain our structural underweight to low-beta, investment-grade countries.
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.

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.