International bond markets presently constitute 60% of the available fixed-income investment opportunities worldwide. This includes bond issues from emerging economies and non-government entities, such as European corporations. Since interest rate fluctuations differ from country to country, international bonds are another way to balance downturns in the U.S. markets. Further they help in diversifying currency exposure and protecting assets against a long-term secular decline in the U.S. dollar.
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.
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 15.07% in the last one year period.
Thomas Cooper is the fund manager and has managed this international bond mutual fund since 1993.
PIMCO Developing Local Markets A (PLMAX) invests a large proportion of its assets in fixed-income securities denominated in currencies of emerging markets or these currencies themselves. Not more than 15% of the fund’s assets may be utilized to purchase high-yield securities. The international bond mutual fund has a five year annualized return of 5.44%.
As of December 2010, this international bond mutual fund held 193 issues, with 12.04% of its total assets invested in Pimco Fds Private Account Portfolio Ser.
Dreyfus International Bond A (DIBAX) seeks capital growth and income. The fund invests at least 65% of its assets in foreign securities not denominated in U.S. dollars. Not more than 25% of its assets are utilized to purchase emerging markets securities; and a maximum of 5% may be invested in a single emerging market country. The international bond mutual fund returned 9.81% in the last one year period.
The international bond mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.09% compared to a category average of 1.14%.
Columbia Emerging Markets Bond A (REBAX) invests the majority of its assets in emerging market securities with generate fixed income. The fund may also consider for investment companies which derive a significant portion of their revenues from emerging markets. The international bond mutual fund has a three year annualized return of 10.56%.
Jim Carlen is the fund manager and has managed this international bond mutual fund since 2008.
Lord Abbett Emerging Markets Currency A (LDMAX) seeks high total return. The fund invests heavily in securities which provide exposure to developing market currencies or fixed income instruments denominated in such currencies. A large proportion of its assets may be invested in forward foreign currency contracts. The international bond mutual fund returned 6.72% in the last one year period.
The international bond mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.17% compared to a category average of 1.31%.