T. Rowe Price has launched the T. Rowe Price Emerging Markets Local Currency Bond Fund, in anticipation of those investors who would like to diversify away from the U.S. dollar.
While the fund can invest in bonds issued by companies in emerging markets, it will primarily invest in investment-grade sovereign bonds issued by emerging market governments.
It will invest in the 15 emerging market local currencies in Europe, Asia, Latin America, the Middle East and Africa, with the approximate duration of the bonds it holds 4.5 years. It aims to deliver an average yield to maturity of 6.4%. The fund’s return will be primarily driven by currency performance, local interest rate movements and credit fundamentals.
Chris Rothery, a 23-year veteran of the financial services industry, and Andrew Keirle, a 14-year veteran, will co-manage the fund.
“The prospect of currency appreciation is an important component of the Emerging Markets Local Currency Bond Fund’s potential return,” Rothery said. “We’re seeing evidence that these currencies may appreciate relative to the U.S. dollar over the long term. But investing in emerging market local currency bonds offers more than diversification away from the U.S. dollar. We’re also seeing a structural shift in bond markets, from developed markets to emerging markets, as emerging markets bonds improve in credit quality.”