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By Ryan Leggio | 07-06-2010 02:46 PM

Emerging Markets Mature

DoubleLine Emerging Markets Fixed Income Fund manager Luz Padilla says the emerging-markets debt asset class has migrated toward the cusp of becoming investment grade. Plus: Padilla on opportunity in emerging-market corporates.

Ryan Leggio: Hi. I am Ryan Leggio. I am a mutual fund analyst at Morningstar. We're here in Los Angeles at DoubleLine, and with me today is Luz Padilla, the manager of the DoubleLine Emerging Markets Fixed Income Fund.

Luz, thanks so much for joining us today.

Luz Padilla: Thank you for coming in.

Leggio: The first question I wanted to ask was really how investors should look at an emerging markets' fund in the context of a total portfolio? Is this something that provides a good diversification benefit at all times for investors?

Padilla: I think if you look at the history of the asset class, the asset class really has matured from being really a high-yield only type of asset class to now where, 15, 16 years later, into an asset class that really deserves a place in a well balanced fixed income portfolio.

Just starting with the history of returns: If you look at the returns, the returns have been in the low double-digits, somewhere between 10% and 12%, again, per annum for that full history. And in addition to that, you've had a very nice transition or upward migration of the asset class, again, from just a plain high-yield to almost now being on the cusp of becoming an investment-grade asset class.

Leggio: So, you are the manager right now of the DoubleLine Emerging Markets Fund. Previously, you were for years, the manager of the TCW Fund of a similar name, and where are you finding the opportunities right now? Credit spreads in the United States have really narrowed. Where are the opportunities in emerging market countries?

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