While our emerging markets bond funds focus their investments in similar geographic regions, there are some important distinctions. The table below compares some of the key differences between our international bond funds.
|Emerging Markets Corporate Bond Fund||Emerging Markets Local Currency Bond Fund||Emerging Markets Bond Fund||International Bond Fund|
|Investors looking for..|
|High income potential|
|Lower exchange rate risk||Limited Exposure|
|Exposure to credit-like asset class|
|Potential currency diversification outside of the U.S. dollar|
lower correlation to U.S. corporate bonds
|Investors looking for potential…|
|Diversification against U.S. dollar treasuries||Limited Diversification|
|Exposure away from fiscal deficits in developed markets|
|Partial hedge against rise in commodity prices|
|Can be associated with…|
|Credit quality risk||Higher||Higher||Higher||Lower|
|Interest rate risk||Lower||Medium||Medium to Higher||Medium to Higher|
Investing in the securities of non-U.S. issuers involves special risks not typically associated with investing in U.S. securities. Foreign securities tend to be more volatile and less liquid than investments in U.S. securities and may lose value because of adverse political, social, or economic developments overseas.
The risks of foreign investing are heightened for securities of issuers in emerging market countries. Emerging market countries tend to have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries. In addition to all of the risks of investing in foreign developed markets, emerging markets are more susceptible to governmental interference, local taxes being imposed on foreign investments, restrictions on gaining access to sales proceeds, and less liquid and efficient trading markets. Companies and governments issuing lower-rated bonds are not as strong financially as those with higher credit ratings, and their bonds are often viewed as speculative investments. To the extent the funds use forward foreign exchange contracts, swaps, options, or futures, they are exposed to additional volatility in comparison with investing directly in bonds and other debt securities.
Diversification cannot assure a profit or protect against loss in a declining market.