This 12% Yielder Is A Strong Long-Term Holding
But There May Be A Better Entry Point
Every week, we’ll profile a high yield investment fund that typically offers an annualized distribution of 6-10% or more. With the S&P 500 yielding less than 2%, many investors find it difficult to achieve the portfolio income necessary to meet their needs and goals. This report is designed to help address those concerns.
Over the past two years, emerging markets debt has proven to be a good bet in the fixed income space. The above average yields were always compelling in isolation, but an aggressive rate hiking cycle in the United States that destroyed long-term Treasuries has made EM debt even more attractive. Emerging markets were generally ahead of developed markets in addressing the inflation crisis and, in turn, were able to cut interest rates earlier than in the U.S., Europe, the U.K., Canada and Australia. That’s given them a big advantage in recent years, but it appears that it’s also a tailwind that’s running out of steam.
In the closed-end fund space, there’s not a lot to choose from if you want to invest in emerging markets bonds, but it does offer one of the best options. The Morgan Stanley Emerging Markets Debt Fund (MSD) has earned a 5-star rating from Morningstar, while delivering strong portfolio management with managed risk. With emerging markets potentially looking more challenging as we enter a period of global economic slowdown, investing in this group might require more proper risk management than it has in years, but MSD might be up to the task.
Fund Background
MSD’s primary investment objective is to produce high current income and as a secondary objective to seek capital appreciation by investing in a range of sovereign, quasi-sovereign and corporate debt securities in emerging markets. To help achieve its objective, the fund combines top-down country allocation with bottom-up security selection.
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