Global obligation Funds have become more popular with investors over the years. Typically, bond funds invest in corporate and government debt titles of developed nations. However, bond funds containing holdings of emerging market economies have also grown in popularity. Investors looking yield often migrate to bond funds in search of a stable income stream. Bonds are fixed-income debt securities that companies and governments issue to raise funds and, in return, usually pay investors a fixed rate of interest.

Unfortunately, 2020 faced challenges due to the global crisis and the recession or negative economic growth. The Federal Reserve broadened its monetary policy by cutting interest rates, buying corporate bonds and providing relief to businesses through its loan and credit programs.

Demand for bonds and bond funds continues to be strong as risk averse investors pour money into bond markets and a need for portfolio diversification between domestic and international stocks, bonds and other asset classes. There is also a wave of investment democratization which has allowed new sections of the population to enter the investment space. Still, there are several bond funds with international exposure that can offer investors solid options.

1. Fidelity Global Credit Fund (FGBFX)

Fidelity Global Credit Fund (FGBFX) invests in corporate bonds issued worldwide, in which 80% of the fund’s assets consist of debt securities of all types. The Fidelity Investments fund invests primarily in investment grade debt securities, of which 74% are international and 26% are US debt securities.

The fund is also open to currency risk and hedges currency risk using futures contracts, which are contracts that can lock in the exchange rate. Here are some of the features and costs of the fund:

  • Expense ratio: 1.10% as of February 29, 2020
  • 30-day SEC dividend yield: 1.46% as of December 31, 2020
  • Assets under management: $119 billion as of December 31, 2020
  • Creation date: 05/22/2012
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The fund’s top five country allocation weights (as of November 30, 2020) are as follows:

  • United States: 43.44%
  • Germany: 20.58%
  • France: 6.15%
  • United Kingdom: 6.03%
  • Switzerland: 4.15%

The fund has a weighted average maturity of 6.50 years as of December 31, 2020 and contains 194 securities as of September 30, 2020. There is no minimum investment amount.

2. Templeton Global Bond Fund (TPINX)

The Templeton Global Bond Fund (TPINX) seeks to provide current income and capital appreciation, as well as growth by investing at least 80% of its assets in government and agency bonds worldwide. Franklin Templeton Investments’ portfolio managers seek investment opportunities across currencies and interest rates for reasonable returns, as well as substantial portfolio diversification.

Here are some of the features and costs of the fund:

  • Expense ratio: 0.99% as of May 1, 2020.
  • 30-day SEC dividend yield: 2.13% as of December 31, 2020.
  • Assets under management: $16 billion as of November 30, 2020
  • Date of creation: September 18, 1986

Please note that funds with higher expense ratios may reduce performance over time. However, anything below 1.0% is generally fine for most investors.

The fund has a weighted average maturity of 2.42 years and contains 213 holdings as of December 31, 2020. The fund has 91.94% of its assets invested in international fixed income securities, with the remainder held in cash.

The top five country allocation weights (as of November 30, 2020) are as follows:

  • United States: 24.30%
  • Mexico: 17.33%
  • Japan: 12.25%
  • Indonesia: 10.52%
  • South Korea: 7.78%

The fund has a minimum investment amount of $1,000.

3. PIMCO Global Bond Fund Unhedged (PIGLX)

Pimco Global Bond Fund Unhedged (PIGLX) focuses on investing in high quality developed countries around the world. The fund is managed by Pacific Investment Management Company LLC (PIMCO). It is important to note that the PIGLX is designed for the most affluent investors as it requires an initial investment of $1 million.

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The primary benchmark on which the fund’s holdings are based is the Bloomberg Global Aggregate (USD Unhedged) Index, which has exposure to the US, pan-European and Asia-Pacific markets.

The fund seeks to provide exposure to multiple economies, including developing countries denominated in global currencies. The fund is designed to provide exposure to global bond markets while allowing for exchange rate appreciation. In other words, the fund does not hedge currency exposure. Although exchange rates can fluctuate and contribute to fund performance, currency volatility can also reduce returns.

Here are some of the features and costs of the fund:

  • Expense ratio: 0.67% as of July 31, 2020
  • 30-day SEC dividend yield: 1.34% as of November 30, 2020
  • Assets under management: $195 billion as of September 30, 2020
  • Date of creation: November 23, 1993

The top five country allocation weights (as of November 30, 2020) are as follows:

  • Italy: 19.24%
  • Australia: 15.70%
  • United States: 15.67%
  • Spain: 13.19%
  • Denmark: 9.42%

The fund holds over 665 fixed income securities with an effective maturity of 6.21 years as of September 30, 2020. More than 49% of the fund’s bonds have maturities of 5 to 7 years.

4. AB Global Bond Fund (ANAGX)

The AB Global Bond Fund (ANAGX) invests in fixed income securities from developed and emerging markets. ANAGX is designed to generate income while preserving capital. The fund seeks opportunities across multiple sectors and has 1,019 holdings as of November 30, 2020.

Here are some of the features and costs of the fund:

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  • Expense ratio: 0.56% as of January 31, 2020
  • 30-day SEC dividend yield: 1.27% as of December 31, 2020
  • Assets under management: $7 billion as of November 30, 2020
  • Creation date: November 5, 2007

The top five country allocation weights (as of November 30, 2020) are as follows:

  • United States: 37.40%
  • Japan: 15.33%
  • China: 8.75%
  • United Kingdom: 6.36%
  • Australia: 5.45%

Over 60% of holdings are global government bonds and investment grade corporate debt. The average bond maturity is 9.53 years and the minimum initial investment is $2,500.

5. DFA 5-Year Global Fixed Income Fund (DFGBX)

The Dimensional Fund Advisors (DFA) 5-Year Global Fixed Income Fund (DFGBX) seeks to provide a market rate of return with a low volatility for returns. As its name suggests, the fund invests in US and foreign debt securities with deadlines five years or less. The shorter term to maturity means the fund may experience less volatility. If a fund’s bonds have a longer maturity, there is more interest rate riskwhich means that market rates could rise and exceed fund rates.

Here are some of the features and costs of the fund:

  • Expense ratio: 0.26% as of December 31, 2020
  • 30-day SEC dividend yield: -0.26% as of December 31, 2020
  • Assets under management: $13.4 billion as of December 31, 2020
  • Date of creation: November 6, 1990

The top five country allocation weights (as of September 30, 2020) are as follows:

  • Canada: 20.32%
  • Supranational country: 18.77% (like the European Union)
  • France: 9.68%
  • Netherlands: 8.78%
  • Germany: 7.36%

The fund has 322 holdings that include government and corporate debt securities with an average maturity of 0.94 years. There is no minimum initial investment amount.

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