2 Free-Ranging Emerging-Markets Bond Funds

Karin Anderson: Emerging-markets bond funds are off to a strong start so far in 2017. Many of them are up in the midsingle digits for the first four months of the year.

There are two general types of EM bond funds: those that focus on hard currency, which are typically dollar-denominated issues, and those that focus on local currency bonds, which are denominated in emerging-markets currencies. In 2016, Morningstar separated out local currency EM bond funds into their own category, which makes a good deal of sense because those funds carry a great deal of currency risk and also rate risk, compared to those hard currency EM bond funds that primarily a credit risk that you are going to add to your portfolio.

Some of the funds that we like in this space that can go anywhere across the hard currency and local currency landscape are TCW Emerging Markets Income and T. Rowe Price Emerging Markets Bond. Over time those teams behind those funds have done a good job picking their spots across the EM bond landscape.

You don't need to confine yourself to the EM bond categories for EM bond exposure. You see a good deal of that in the world bond space. So, two examples there would be Templeton Global Bond and PIMCO Global Bond, which to some extent invest in EM bonds as well. Another category to consider would be multisector bond funds like Fidelity Strategic Income or John Hancock Income, which will devote a good deal of their assets to emerging-markets bonds.