Top Performer World Bond Funds June 2011

With stabilizing world economy, fixed income investors will be wondering where to put their investment money. World bond funds offer instant portfolio diversification with investments in variety of bonds of different countries and sectors. This type of bond can mitigate the investment risks involved if some countries go bankrupt or are unable to pay their debt. This international bond fund may invest in US government bond or corporate bond, European bond, emerging market bonds, etc. This world bond funds may provide opportunity for investor to invest in fast growth developing countries (Indonesia, China, Russia, Brazil, etc) as well as other developed countries (German, France, Japan, UK, etc).

Top Performer World Bond Fund 2011

Several reasons to invest in these World Bond Funds are:

• These funds can provide global exposure hence it invest in bond markets worldwide
• These funds may provide attractive yield than domestic bond
• Investor can have direct access to experienced bond manager
• These funds may provide better return than domestic bond

The following list is compiled based on the fund performance in 2011 (up to June 2011). The fund is researched from various website and magazine like Morningstar, Yahoo Finance, Google Finance, USNews, etc. The 12 Top Performer World Bond Mutual Funds 2011 are:

1. Forward EM Corporate Debt Investor
2. Loomis Sayles International Bond A
3. Prudential Global Total Return A
4. Invesco International Total Return A
5. American Century International Bond Inv
6. GMO International Bond III
7. T. Rowe Price International Bond
8. EuroPac International Bond A
9. PIMCO Foreign Bond (Unhedged) A
10. Columbia International Bond A
11. Putnam Global Income A
12. Templeton Global Total Return A

updated on June 15th, 2011

1. Forward EM Corporate Debt Investor (FFXRX)

As the top performing fund in World Bond category, this Forward EM Corporate Debt fund seeks to achieve high total return in term of capital appreciation and income. The fund usually invests >80% of net assets in a diversified portfolio of fixed income securities of companies based in emerging market countries. It tries to capitalize on the inefficient emerging market corporate bond market by offering exposure primarily to U.S.-dollar and Euro- denominated fixed income securities of emerging market issuers, and related derivatives. The fund will invests its assets among >10 emerging market countries throughout the world. This fund is classified as a non-diversified bond fund.

Forward FFXRX fund details

Since January 2007, Simon Lue-Fong has managed this Forward Funds fund. The fund only has $29 million net assets. The annual expense ratio is 1.39%. There is no other fee such as front end sales load since it is a no load fund. It does have 0.25% management fee. Morningstar rates this Forward fund with 3 stars rating. The current yield of this fund is 2.24%.

For 2011 Year-To-Date, this Forward EM Corporate Debt Investor fund has returned 9.54%. If you are interested in lower fee of this fund, you can also invest in other fund classes: Class C (FFXCX), and Institutional Class (FFXIX). The FFXIX fund also has the lowest expense fee of 0.99%. You can purchase this fund from 49 brokerages like Pershing FundCenter, TD Ameritrade, Ameriprise Brokerage, Raymond James, Scottrade NTF, etc.

As of April 2011, the fund’s top 7 sectors include government bond (30%), energy (19.6%), financial (13.1%), non-cyclical consumer (11.9%), industrial (6.7%), basic materials (6.3%), and communications (4%). The top 10 countries exposure include Germany (19.9%), United Kingdom (13.4%), Russia, 8.5%), Canada (8.4%), Mexico (6.3%), Norway (4.9%), United States (4.7%), France (4.4%), Netherlands (3.4%), and Ukraine (3.4%). This fund currently holds 64 bonds. The top 7 bond holdings are Bundesrepublik Deutschland Bonds Series 05, Bundesrepublik Deutschland, Canadian Government Bond, Unilever Capital Corp Gtd Notes, Cemex SAB de CV, UK Treasury Bonds, and Statoil ASA Gtd Notes.

2. Loomis Sayles International Bond A (LSIAX)

Loomis Sayles International Bond

As part of Natixis Funds family, this Loomis Sayles International Bond fund is seeking high total investment return. The fund invests most of net assets (>65%) in fixed income securities of issuers located outside of the United States. This LSIAX fund may invest 35% of assets in lower rated fixed incomes or bonds (i.e. junk bonds). Bond held by the fund may be denominated in any countries or in any currency including emerging markets.

The lead manager of this Loomis Sayles fund is Lynda L. Schweitzer since 2008. Investor can invest in this fund by opening a brokerage account with $2,500 minimum initial investment. The 12b1 fee of this fund is 0.25% and the front-end sales load fee is 4.50%. The expense ratio of this LS fund is 1.10% per year. The fund’s weighted average duration is 5.23 years and the average maturity is 6.52 years.

LSIAX also received 3 stars rating from Morningstar, but it has year-to-date (2011) return of 7.32%. The best total return was achieved in 2009 with 17.28%. It has returned 14.91% over the past one year. Investor can buy this fund from 52 brokerages; include Etrade, Schwab, RBC Wealth Management Network, Met Life Resources MFSP Alliance List, TIAA-Cref NTF, etc.

As of May 2011, the sector distribution of this Loomis Sayles fund are Non-US Dollar Ex CAD (81.06%), High Yield Credit (4.89%), Canadian Dollar (3.47%), US Treasury (2.02%), Investment Grade Credit (1.16%), Emerging Markets Debt (.058%), Convertibles (0.23%), and cash & equivalents (6.59%). The top 5 countries allocated in this fund are United States (19.4%), Germany (16.4%), Japan (13.75%), Canada (9.76%), and Mexico (4.14%). The fund has 102 bond issues.

3. Prudential Global Total Return A (GTRAX)

Prudential Global Total Return fund details

Prudential Global Total Return fund seeks total return of current income and capital appreciation. This Prudential Investment fund will invest through a diversified portfolio of U.S. and non-U.S. fixed income securities. It mostly invests in investment-grade securities denominated in U.S. dollars or foreign currencies, but may invest in below-investment-grade high yield and emerging markets securities. The fund manager is Michael Collins.

The fund has dividend yield of 10.36%. The expense ratio of this Prudential Global Total Return fund is 1.35% per year. It also has 0.30% management fee and 4.50% sales load fee. Morningstar gives 3 stars rating for this fund performance. The current total net assets are $153 million. To invest in this fund, you will need $2,500 minimum investment. This fund is opened to any investors.

Hence this GTRAX fund is part of load fund; you can also select other classes to find better investment choice with lower fees. The other classes are: Class B (PBTRX), Class C (PCTRX), and Class Z (PZTRX). The PZTRX fund has only 1.10% annual expense ratio. This Z class fund doesn’t have any sales load.

The top 10 sectors in this fund portfolio as of May 2011 are Investment Grade Corp (22.2%), Emerging Markets (18.9%), Asset Backed Securities (12.7%), Government Bonds (12.6%), High Yield & Not Rated Credit (9.7%), Commercial MBS (7.1%), Mortgages & CMO (3.3%), Municipal Bonds (2.7%), Other (2%), and Cash & Equivalents (8.8%). The top 6 countries of this Prudential Investment fund are United States, United Kingdom, South Korea, Japan, Brazil, and Russia. The fund has an average duration of 6.6 years and an average maturity of 7.2 years.

4. Invesco International Total Return A (Ticker: AUBAX)

Invesco AUBAX fund details

The Invesco International Total Return fund seeks total return; consist of current income and capital appreciation.  The fund invests in a diversified portfolio of foreign government and corporate debt securities, usually characterized by the sector categories within the Barclays Capital Global Aggregate ex U.S. Index (unhedged), and in foreign currency investments. This AUBAX fund may invest in derivatives such as swaps, options, and futures contracts. The fund may invest a significant amount of its total assets in foreign securities and may invest <30% of total assets in U.S. dollar-denominated securities.

This Invesco fund’s manager is Russell Matthews. This fund also has a dividend yield of 4.70%. The fund has annual expense ratio of 1.10%. The 12b1 fee of this fund is 0.25%, and front-end sales-load fee of 4.75%. Morningstar has rated this AUBAX fund with 2 stars rating. The fund total net assets are $51 million. The 3-year beta is 1.01 and 3-year R-Squared is 0.97. The fund’s effective duration is 5.97 years and the fund’s weighted average effective maturity is 8.01 years.

It has recorded 4 years positive performance with the best total return in 2007 with 9.30%. It has returned 7.57% over the past year and 5.28% over the past five years. This Invesco International Total Return fund has 6.83% YTD return.  Investor can invest in the other classes of this fund, such as Class B (AUBBX), Class C (AUBCX), Class Y (AUBYX) and Class Institutional (AUBIX). The AUBIX and AUBYX have the lowest expense fee with 0.85% and there is no load for these classes.

The minimum balance required to open a brokerage account in this fund is $1,000 and $250 for IRA account. AUBAX can be bought from 73 brokerages such as Firstrade, Fidelity, Edward Jones, Schwab Institutional, Morgan Stanley Advisors, MSSB Retail Fund, Matrix Financial Solutions, etc.

As of June 2011, the top 10 industries of this Invesco fund include Sovereign Debt (46.35%), Diversified Banks (22.96%), Specialized Finance (7.9%), Other Diversified Financial Services (4.21%), Multi Line Insurance (2.37%), CMOs (1.41%), Security & Alarm Services (1.12%), Multi-Sector Holdings (0.95%), Construction & Engineering (0.91%), and Investment Banking & Brokerage (0.84%). The top 6 countries are Italy (11.80%), Spain (9.88%), United Kingdom (9.18%), Canada (8.7%), Netherlands (8.65%), and France (7.95%).

5. American Century International Bond Inv (BEGBX)

This American Century International Bond fund objective is to provide high total return. The fund invests its assets in high-quality debt securities. It invest majority of net assets (>80%) in debt securities issued by foreign corporations and foreign governments. The fund’s management expects the fund's dollar-weighted average maturity to range from 2 to 10 years. It may hedge up to 25% of assets into U.S. dollars when the advisor considers the dollar to be attractive relative to foreign currencies. The fund also may invest in options, futures contracts, futures contracts options, and swap agreements. It is non-diversified.

This American Century fund has been managed by John A. Lovito since 2009. The fund net assets are $1.4 billion. As part of no load fund, the annual expense ratio of this fund is 0.82%. The dividend yield of this fund is 3.82%. This taxable bond fund is rated 3 stars rating by Morningstar. The fund’s duration is 6 years. The weighted average life is 9 years.

For 2011 Year-To-Date, this American Century International Bond fund has returned 6.42%. Other classes of this American Century fund are Class A (AIBDX), Class B (AIQBX), Class C (AIQCX), Class R (AIBRX), and Institutional Class (AIDIX). Investor can buy this BEGBX from 109 brokerages like JPMorgan, Pershing FundCenter, Schwab RPS, Raymond James, RBC Wealth Management, Dreyfus NTF, Scottrade, etc.

As of April 2011, the top 5 portfolio sectors are Non US Denominated (82.88%), Cash (9.7%), Securitized (4.58%), credit (2.86%), and derivatives (0.02%).

Other interesting top performer funds

7. T. Rowe Price International Bond (RPIBX)

T Rowe Price International Bond fund

The T. Rowe Price International Bond fund objective is to provide high current income and capital appreciation. Normally, the fund invests at least 80% of its net assets in foreign bonds and 65% of its net assets in foreign bonds that are rated within the three highest credit categories (i.e., A- or equivalent, or better). This T. Rowe Price taxable bond fund may invest >20% of its total assets in bonds that have received a below investment-grade rating from each of the rating agencies that has assigned a rating to the bond, including those in default or with the lowest rating. It is non-diversified.

Since December 2001, this T. Rowe Price fund is managed by Ian Kelson. RPIBX fund is now open to new retail investors. This fund was formally introduced to retail investor in September 1986. The minimum balance to open a brokerage account for this fund is $2,500 and $1,000 for IRA account. The minimum of $100 is needed for the subsequent investment for brokerage account and $50 for IRA account. There is no 12b1 fee as well as no sales-load fee for investing in RPIBX. The annual expense ratio of this fund (0.82%) is lower than the average (1.13%).

The performance of this fund is as below:

• 1-year: 17.06%
• 3-year: 5.37%
• 5-year: 6.67%
• 10-year: 8.15%

The RPIBX fund has a 6.67% of 5-year average return with 5.33% of year-to-date return. Since its inception, the fund has 16 years of positive return (the best return occurred in 2002 with 21.80%) and 8 years of negative return (the worst return is -8.18%). As of March 2011, the assets allocation of RPIBX is as follow: 97.1% in foreign bond, 2.6% in cash and 0.4% in domestic bond.

RPIBX can be purchased from 80 brokerages include JP Morgan, T Rowe Price, Vanguard, Schwab Institutional, Scottrade TF, Firstrade, Principal Advantage, Bear Stearns, HDVest – Wells Fargo, Schwab Retail, Td Ameritrade Inc, etc.  As per March 2011, this fund has 483 holdings.

9. PIMCO Foreign Bond (Unhedged) A (PFUAX)

The PIMCO Foreign Bond is seeking maximum total return, consistent with capital preservation and prudent investment management. The fund invests >80% of assets in Fixed-Income Instruments that are economically tied to foreign (non-U.S.) countries, representing at least 3 foreign countries. It may be represented by forwards or derivatives such as options, future contracts or swap agreements. It may invest in derivative instruments, such as options, futures contracts or swap agreements, or in mortgage- or asset-backed securities. The fund is non-diversified.

PIMCO Foreign Bond

This PFUAX fund has 3.48 billion net assets. The annual expense ratio of this fund is 0.95%. This expense ratio is lower than the average expense of 1.13%. The last dividend was distributed in April 2011. The fund dividend yield is 5.83%. This fund has returned 12.78% over the past year and 8.20% over the past 5 years. It has experienced 4 years with positive return and 2 year with negative return. The best return was recorded in 2009 with 20.79%.

This fund does have 0.25% management fee and 3.75% front-end sales load fee. This fund is managed by Scott A. Mather since February 2008. The minimum balance required to invest in this fund is $1,000 for brokerage account with $50 minimum subsequent investment. There is no IRA account available.

This fund can be purchased from 93 brokerages include Prudential Retail, Vanguard, Merrill Lynch, TD Ameritrade, JP Morgan, Raymond Jams, Firstrade, American Plan Premier, etc.

The other classes of this fund are Institutional Class (Ticker: PFUIX), Admin Class (Ticker: PFUUX),  C Class (Ticker: PFRCX), D Class (Ticker: PFBDX) and P Class  (Ticker: PFUPX). The top countries of this fund as of May 2011 are 32.50% in Japan, 30.80% in Germany, 13.40% in United Kingdom, 5.90% in Europe, 4.70% in France, 4.40% in Canada, 3.40% in Netherlands and 3.40% in Mexico.

Disclosure: No Position