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Are Investors Underestimating The Risks In Emerging Market Bonds?

By Detlef Glow

During their chase for yield, a number of investors have added emerging-market bonds to their portfolios, since these bonds seemed to be fairly valued and offered a yield suiting the needs of the investors. But, as always in a long bull market, some of the risks carried by these bonds might have been overlooked, and they have hit investors very hard when they appeared.

One of these risks is geopolitical and/or country-specific risk, which measures in general the ability of a country to pay back its debt. Other risks such as a possible war or insurgency are often not investors' focus. That these risks are not just fiction can be seen in the current crisis between the Ukraine and Russia and its impact on the performance of funds investing in bonds from these countries.

It is not only the performance of the bonds that drives the performance… Read More …