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Fidelity New Markets Income Stays Focused on Its Roots

This dedicated emerging-markets bond fund takes on some big credit bets, but has less volatility than a local currency fund, says Morningstar's Karin Anderson.

Karin Anderson: Fidelity New Markets Income is a Silver-rated fund in the emerging-markets bond category. It's managed by John Carlson, who has been running it since the mid-'90s. He has a small crew of managers and analysts helping him, but most of them have been working in this space together for more than a decade. And so they have seen the evolution of the emerging-markets bond space as it's gone from hard currency debt on into local currency and corporate.

Some of the funds in this category will invest in local currency bonds and corporates, but this team has really stayed more focused on its roots, which is the hard currency emerging-markets bond side. So, investing in this type of debt means that they are investing dollar-denominated issues or yen, and that has the advantage of keeping down volatility.

They do take on some pretty significant credit bets. Some of those lately have been in Brazil, Venezuela, and Russia, but over time they've used that approach well, and they have kept an eye on valuations and also emphasized country and issue diversification. Doing that well, over time they have a very good risk-adjusted track record compared to other funds that focus on the hard currency market and also versus the JPMorgan EMBI benchmark.

So, for investors that are looking for a dedicated emerging-markets bond fund with less volatility than a local currency fund, Fidelity New Markets Income is definitely worth a look.

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