International Bond

International bond mutual funds and ETFs invest the majority of their assets... International bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations around the world. These funds can be actively or passively managed and may seek to track or outperform a particular benchmark. They may hedge foreign currency risk, or elect to leave themselves exposed to fluctuations in other nation’s currencies. Depending on their mandate, these funds may focus on investment-grade bonds, high-yield (a.k.a. junk bonds), or a mix of credit quality. In addition, these funds may have a mandate to invest in a particular region or continent. Some funds, for example, are only allowed to own developed market bonds by their investment mandate. At the end of 2020, central governments in advanced economies had issued nearly US$44 trillion in bonds, three times that of emerging market economies. Investors typically purchase these funds in order to achieve a mix of capital growth and income for their portfolios. These funds can appeal to investors with a range of risk tolerances. A fund that exclusively owns investment-grade bonds in developed markets will tend to be lower risk than a high-yield fund that invests in frontier markets, for instance. Like all fixed-income investments, these funds can come with duration risk, which is the potential that rising interest rates reduce the value of bonds a portfolio already owns. On the flip side, falling interest rates can lead to a rise in the price of bonds. Last Updated: 12/04/2024 View more View less

International bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations around the world. These funds can be actively or passively managed and may... International bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations around the world. These funds can be actively or passively managed and may seek to track or outperform a particular benchmark. They may hedge foreign currency risk, or elect to leave themselves exposed to fluctuations in other nation’s currencies. Depending on their mandate, these funds may focus on investment-grade bonds, high-yield (a.k.a. junk bonds), or a mix of credit quality. In addition, these funds may have a mandate to invest in a particular region or continent. Some funds, for example, are only allowed to own developed market bonds by their investment mandate. At the end of 2020, central governments in advanced economies had issued nearly US$44 trillion in bonds, three times that of emerging market economies. Investors typically purchase these funds in order to achieve a mix of capital growth and income for their portfolios. These funds can appeal to investors with a range of risk tolerances. A fund that exclusively owns investment-grade bonds in developed markets will tend to be lower risk than a high-yield fund that invests in frontier markets, for instance. Like all fixed-income investments, these funds can come with duration risk, which is the potential that rising interest rates reduce the value of bonds a portfolio already owns. On the flip side, falling interest rates can lead to a rise in the price of bonds. Last Updated: 12/04/2024 View more View less