Top 5 International Bond Mutual Funds (Feb. 2011)

Even though the U.S. bond market holds great attraction for investors, it has figured only infrequently among top-performing markets worldwide in the recent past. Investing in foreign bonds, therefore, enhances prospects of exposure to the best-performing foreign markets. Foreign bonds also help to diversify currency exposure and provide protection against a long-term secular decline in the dollar. Mutual funds are a convenient way to give one’s portfolio the desired international fixed-income exposure.

Below we will share with you 5 top rated international bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future.

MainStay Global High Income A (MGHAX) invests the majority of its assets in foreign high-yield debt securities. It invests in such securities issued by governments, their agencies as well as companies located in at least three different countries, focusing on emerging markets. The international bond mutual fund is non-diversified and has a ten year annualized return of 12.48%.

The Fund Manager is Gary Goodenough and he has managed this international bond mutual fund since 2003.

T. Rowe Price Emerging Markets Bond (PREMX) seeks to provide a high level of current income and invests heavily in emerging market debt securities. These could be both government securities and those issued by corporate entities. It is non-diversified and may invest in bonds with relatively low ratings. The international bond mutual fund returned 13.28% in the last one year period.

As of December 2010, this international bond mutual fund held 218 issues, with 7.91% of its total assets invested in Russian Federation 7.5%

Federated International High Income A (IHIAX) invests in emerging market debt securities with different maturity periods. It may purchase a significant amount of securities rated below investment grade and invest in derivatives. The international bond mutual fund has a three year annualized return of 9.1%.

The international bond mutual fund has a minimum initial investment of $1,500 and an expense ratio of 1.24% compared to a category average of 1.31%.

Pioneer Global High Yield A (PGHYX) invests the majority of its assets in domestic and foreign high yield debt securities and preferred stocks. It invests in securities with any rating and a wide range of maturity periods. The international bond mutual fund returned 18.23% in the last one year period and has a five year annualized return of 7.51%.

The Fund Manager is Andrew Feltus and he has managed this international bond mutual fund since 2001.

GMO International Bond III (GMIBX) seeks to outperform its benchmark, the J.P. Morgan Non-U.S. Government Bond index. The majority of the fund’s assets are utilized to invest in bonds, either directly or through other GMO funds or derivatives. The international bond mutual fund returned 14.03% in the last one year period.

The international bond mutual fund has an expense ratio of 0.38% compared to a category average of 1.14%.

To view the Zacks Rank and past performance of all international bond mutual funds, then click here.

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