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Fund Spy

A Spotlight on World-Bond Funds

This eclectic group offers a wide variety of risk profiles.

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The world-bond category has been one of the fastest-growing fixed-income groups in recent years, both in terms of assets and the number of offerings. Over the past five years, it attracted a lot of new money, ranking fifth after the nontraditional, bank loan, short-term, and ultrashort categories in terms of inflows. As often happens with faster-growing areas of the market, fund companies were quite active in launching new offerings. Nearly 40% of world-bond funds were launched during the period, bringing the total to just under 100 today.

As a result, investors have to contend with a lot of young and unproven choices, not to mention a wide variety of approaches. Some world-bond funds exclude U.S. debt while others are truly global, and there are many levels of emerging-markets exposure within the category. Corporate bonds may play a significant role in some portfolios, while some funds stick exclusively to sovereign debt.

Karin Anderson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.