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Multi-Manager Emerging Markets Debt Opportunity

as of 9/30/17

Fund Commentary

During the third quarter, external emerging market debt generated a positive return of 2.6% as measured by the JP Morgan Emerging Markets Bond (EMBI) Global Diversified Index. High yield issues modestly outpaced investment grade issues, continuing the trend from previous quarters.

Venezuela posted a negative return during the quarter, with a return of -10.6%. In terms of other large issuers, Brazil outperformed the broad market with a return of 4.1%, while Russia lagged with a return of 1.3%. Local markets as measured by the JP Morgan GBI-EM Global Diversified Index returned 3.6% for the quarter. From a country perspective, Brazil was the top performer with a return of 10.8%, followed by Russia with a return of 6.2%. Argentina was a notable laggard, returning -4.1% for the period. Year-to-date, the local debt Index has gained 14.3%.

The Fund outperformed its blended benchmark for the third quarter, with a return of 4.07%. On a regional basis, the Fund’s underweight to Latin America detracted from performance, but the negative impact was offset by strong country and issuer selection within the region, most notably a tilt toward longer-dated bonds in Brazil. The Fund’s exposure to lower-rated securities also was beneficial. While the Fund held an overweight to Venezuela on a market value basis, the Fund’s exposure to shorter-dated issues there helped to mitigate any losses.

 

Not FDIC insured | May lose value | No bank guarantee

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