T Rowe Price has launched the Emerging Markets Corporate Bond Fund (TRECX), which complements its suite of emerging markets bond funds, including the Emerging Markets Bond Fund (PREMX) and the Emerging Markets Local Currency Bond Fund (PRELX). The existing two funds were launched in 1994 and 2011, respectively.
T Rowe Price believes that as emerging markets mature, this secular trend will offer significant investment opportunities and will become an increasingly important portfolio component that should be customised based on long-term investors’ goals and risk tolerance.
The size of the emerging markets corporate bond market now rivals the US high yield market and currently is growing at a double-digit rate annually. It already is significantly larger than the emerging market sovereign debt market issued in US dollars.
Emerging markets corporate bonds offer more direct exposure to the economic growth of emerging markets than sovereign bonds issued by these countries. They also give investors access to the growth of emerging markets consumers with less volatility than emerging markets stocks. The expanding middle class in emerging markets has fuelled a consumer base that now outspends US consumers in total.
Offering investors access to the distinct subsets of emerging markets debt in three separate funds provides the same diversification opportunities investors often have with their US bond investments. The varying degrees of risk in the different types of emerging market bonds suggest that investors should consider customising their allocations.