A $7.2 Billion Emerging Market Fund Amps Up Local Debt Bet.
A manager of the world’s largest mutual fund dedicated to emerging-market bonds is scooping up local currency debt, betting the dollar’s persistent decline is far from over.
Exposure to local debt in Massachusetts Financial Services’ $7.2 billion fund has grown to more than 5% since May, more than twice the average it held over the past decade, according to portfolio manager Neeraj Arora.
Developing-nation bonds denominated in local currencies have rallied, with a gauge of the assets tracking toward its best first-half performance since 2017. The jump follows a dollar slide driven by Trump-era policies — tariffs, tax cuts, and Fed pressure — that have made investors question the long-term outlook for US markets. The dollar is down some 8% this year, with 18 out of 23 main EM currencies gaining against it.
Most of his holdings are concentrated in countries like Czech Republic, Peru and India, markets in strong fiscal standing and without major macroeconomic imbalances, he said. Arora has added local currencies from Turkey, Malaysia and Indonesia and more recently, he’s bought bonds from riskier countries offering high yields, such as Brazil and South Africa.
The MFS Emerging Markets Debt Fund, which Arora co-manages with Ward Brown, has returned 7.9% over the past three years. Its investments mostly track the JPMorgan Chase & Co. sovereign dollar bond benchmark.
Source: Bloomberg