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Van Eck Mutual Funds
02/04/15: Institutional Investor examines the fragile five emerging markets countries and reaches out to investment professionals for their insights. "Ukraine will default, in my opinion," says Eric Fine. "However, given that it is considered to be an important U.S. national security priority, official support appears endless, perhaps leading to a less disorderly default." View article »
10/30/14: Even though Russia’s Central Bank has been intervening almost daily to soften the decline of the ruble, it has been unable to stop the currency’s slide. The WSJ quotes Eric Fine: "The ruble is poised to stay volatile. Whether it gets stronger or weaker, I wouldn’t own any Russian assets. Not because they’re not valuable…but the sanctions make it way too risky. The upside is not worth that downside." View article »
8/27/14: Reuters analyzes the run-up to Brazil’s upcoming presidential election and consults Eric Fine. According to Fine, candidate Marina Silva “passes the message that she would be the country’s president and not its chief economist…But because of Brazil’s economic problems, the situation may require someone who’s more tested.” View article »
8/9/14: Barron’s discusses the recent performance of several investments that contain exposure to Russia and consults Eric Fine on the outlook for emerging markets bonds. "Russia is such a big part of the [JPMorgan Emerging Markets Bond] index that most investors satisfied themselves with underweight positions. But what if they all decided to go to zero weight after the sanctions?"View article »
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By: Eric Fine, Portfolio Manager
The Fund’s biggest winners were Brazil, Mexico, and Argentina in hard currency. The Fund’s biggest losers were Chile, Korea, and Israel, also in hard currency.
During April there were several changes in the broad themes that describe our portfolio. First, we became more selective on duration. Second, even though we continue to have concerns over most local currency debt due to a generally lukewarm growth outlook in emerging markets and low real interest rates, we are now more open to having exposure in idiosyncratic countries with high real interest rates or other advantages. Third, we remain vigilant in the corporate debt space due to concerns about illiquidity, currency mismatches, and issuance but we think that some high-grade bonds have value and some high-yield bonds appear to have priced in some risk. Even though some of our views underwent changes, two themes in our portfolio remained unchanged. We remain cautious on Russia due to high headline risks and potential downside risks if sanctions escalate further. We also remain comfortable with idiosyncratic exposure in Vietnam, Brazil, and Nigeria and we increased this exposure in April.
We have mentioned previously that duration remained a risk in the portfolio. In April, after analyzing a wide range of fundamental and technical factors, which we have been carefully watching for a few months, we adjusted our view on duration to negative. As a result many of our long-dated holdings failed our vulnerability test. Some of the factors for this are as follows. There are signs that growth might be stabilizing and broadening from the U.S. to the Eurozone. Eurozone manufacturing and composite Purchasing Managers Indices (PMIs) performed extremely well in the first quarter and stayed firmly within expansion territory in April. Additionally, money supply in the Eurozone, which includes bank lending, is now expanding at a brisk pace. Monetary conditions in the Eurozone have loosened significantly in the past few months, paving the way for a brighter activity outlook in the region. Another factor is market-based inflation expectations in the G4 nations have picked up noticeably in the past weeks, with the increase most pronounced in the U.S. and the Eurozone. It also looks as if global commodity prices have found a floor and have started to firm. If this trend continues, the low base effect’s impact on headline inflation may become more pronounced in the second half of the year. Finally, the labor markets are gradually tightening and we now see more positive signs on the wage growth front as well – both in the U.S. and in the Eurozone.
Read full April Commentary >>
Portfolio Manager, Global Fixed Income
"The Washington Consensus resulted in higher reserves and higher growth rates among emerging markets countries. Thus EM economies moved away from the original sin of having too much dollar-denominated debt."
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Portfolio Manager, Unconstrained Emerging Markets Bonds Strategies
"A significant portion of our portfolio is composed of long-dated, investment grade, dollar-denominated government bonds, i.e., sovereign bonds. Why do we like them? Our process tells us that credit curves are steep and we're supposed to like the long end of these bonds."
Eric Fine and Fran Rodilosso
"The Hong Kong protests are not likely to impact credit markets in any direct sense. We do think, however, that these types of protests are likely to increase around the world....atomization is happening and we're going to see more of this in Europe and perhaps in other countries."
Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Strategy
"Our starting point is comparing countries' fundamentals to what premium you're getting. Are you getting paid for that risk? Looking at fundamentals alone and putting the important technical default issues to the side, one finds that Argentina is cheap. It's paying spreads that are too high for its fundamentals."
Eric Fine and Natalia Gurushina
Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team
"I think Poland is uniquely positioned to benefit from Germany's rebound... My key concern about Poland, however, is potential exposure to change in sentiment from political risks in Ukraine."
"The scenario of civil war and perhaps a civil war that has broader implications for the region is a scenario we have to think about. It's hard to assign probabilities to that, but the market seems to be saying it's a zero and I think zero is definitely the wrong answer."
Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Fund
"In one word, the value of an unconstrained approach to emerging markets bond portfolio investing is ‘flexibility’. The market changed a lot in the past 20 years. At first, it was only hard currency bonds. Then came hard currency corporates followed by local currency sovereigns. Nowadays, local currency corporates are becoming more prominent. Having an unconstrained mandate is key to optimizing the portfolio using all four sub asset classes."
Improvements in economic policies, strong balance sheets and improved creditworthiness of local governments continue to foster a strong case for investment in the emerging markets bonds.
Emerging Market Bonds Defined
“Emerging Markets Hard Currency Bonds” are bonds denominated in foreign currencies that are generally widely accepted around the world (such as the US Dollar, Euro or Yen).
“Emerging Markets Local Currency Bonds” are bonds denominated in the local currency of the issuer.
“Emerging Markets Sovereign Bonds” are bonds issued by national governments of emerging countries in order to finance a country's growth.
“Emerging Markets Quasi Sovereign Bonds” are bonds issued by corporations domiciled in emerging countries that are either 100% government owned or whose debts are 100% government guaranteed.
“Emerging Markets Corporate Bonds” are bonds issued by non-government owned corporations that are domiciled in emerging countries.
Long term, an allocation to emerging markets bonds may provide diversification benefits as emerging markets fixed income tends to be less correlated to developed market fixed income.
Unless otherwise stated, portfolio facts and statistics are shown for Class A shares; other classes may have different characteristics.
†NAV: Unless you are eligible for a waiver, the public offering price you pay when you buy Class A shares of the Fund is the Net Asset Value (NAV) of the shares plus an initial sales charge. The initial sales charge varies depending upon the size of your purchase. No sales charge is imposed where Class A or Class C shares are issued to you pursuant to the automatic investment of income dividends or capital gains distribution. It is the responsibility of the financial intermediary to ensure that the investor obtains the proper “breakpoint” discount. Class C, Class I and Class Y do not have an initial sales charge; however, Class C does charge a contingent deferred redemption charge. See the prospectus and summary prospectus for more information.
1Van Eck Associates Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding acquired fund fees and expenses, interest expense, trading expenses, dividends and interest payments on securities sold short, taxes and extraordinary expenses) from exceeding 1.25% for Class A, 1.95% for Class C, 0.95% for Class I, and 1.00% for Class Y of the Fund’s average daily net assets per year until May 1, 2016. During such time, the
expense limitation is expected to continue until the Board of Trustees acts to discontinue all or a portion of such expense limitation.
2The J.P. Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM) tracks local currency bonds issued by Emerging Markets governments. The index spans over 15 countries. The J.P. Morgan Emerging Markets Bond Index Global Diversified (EMBI) tracks returns for actively traded external debt instruments in emerging markets, and is also J.P. Morgan’s most liquid U.S-dollar emerging markets debt benchmark.
3Average Yield to Worst measures the lowest of either yield-to-maturity or yield-to-call date on every possible call date. Effective duration takes into account that expected cash flows will fluctuate as interest rates change. Effective maturity is the length of time until a fixed income investment returns its original investment. Distribution Yield is the amount of cash flow paid out and is calculated by dividing the annual income (interest or dividends) by the current price of the security. Averages are market weighted. These statistics do not take into account fees and expenses associated with investments or the Fund.
The views and opinions expressed are those of Van Eck Global. Fund manager commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. Any discussion of specific securities mentioned in the commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary.
You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to risks associated with its investments in emerging markets securities. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. As the Fund may invest in securities denominated in foreign currencies and some of the income received by the Fund will be in foreign currencies, changes in currency exchange rates may negatively impact the Fund’s return. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. The Fund may also be subject to credit risk, interest rate risk, sovereign debt risk, tax risk, non-diversification risk and risks associated with non-investment grade securities. Please see the prospectus and summary prospectus for information on these and other risk considerations.
Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. Bond and bond funds will decrease in value as interest rates rise. The prospectus and summary prospectus contain this and other information. Please read them carefully before investing.
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