Thomas De fauw

Bonds issued by some of the world’s poorest countries have enjoyed a robust start to 2024, despite the backdrop of elevated US interest rates.

This week, we look at bond funds that can freely explore the entire fixed-income and currency universe in search of the best opportunities. Given that bonds, like other types of investments, can be a challenging asset class to predict, it might be a wise choice to let a team of experts decide how to position a portfolio.

The start of 2024 has unfurled a rather promising chapter for global high-yield bonds. While the allure of hefty initial yields continues to draw the investor’s gaze, the relatively narrow spreads hint at an underestimation of the lurking credit risks.

Emerging market debt denominated in local currencies enjoyed a strong year last year, but the first quarter of 2024 saw hardly any movement. For investors looking for diversification, we discuss a leading fund in this category. 

Last week, my colleague Ronald van Genderen covered stocks from emerging markets and their underperformance compared to developed nations over the short and long term. Indeed, this asset class has failed to live up to the high expectations set after a strong period in the early 2000s. 

2023 was a year that high-yield bond investors won’t soon forget. It was a period marked by a spirited comeback, with global high-yield bonds extending their rally, clocking a 3.1% gain in Q4 and culminating in a robust 9.6% total return for the year, as per the ICE BofA Global High Yield Constrained Index.

The 60/40 portfolio has been besieged on all sides since bonds failed to protect against the correction in equities last year. Many see salvation in alternative assets, while others preach flexible allocation. 

Despite the veritable stock market crash in Vietnam last year, Southeast Asian equities kept their heads above water. This was mainly due to the positive performance of Thai and Indonesian stocks. For future performance, eyes are on the direction of the dollar, the positioning of global investors, as well as the global economic outlook.

For investors in listed real estate who are deeply concerned about growth slowdowns and increased financing costs, 2022 is a year that will not soon be forgotten. For this week’s Top-5, we look at the best-performing global real estate funds in 2022. 

After a dramatic first half of the year where global high-yield bond funds lost 7.3 per cent of their value, the second half of last year saw a small gain of 1.4 per cent, in euro terms. The consensus among fund managers remains that despite recession fears, we will not see a wave of defaults in 2023 either. 

For this week’s Morningstar Top 5, we look at the best-performing funds investing in emerging market local currency bonds. These funds ended 2022 with a loss of 9.9 per cent, measured in dollars, or 4 per cent in euros. The outlook for this risky asset class does not seem favourable at first glance, although some fund managers say there are opportunities.