Fund Goal and Approach
The fund seeks to maximize total return.To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in bonds and other debt instruments of emerging market issuers, and in derivative instruments that provide investment exposure to such securities. Bonds and other debt instruments of emerging market issuers include those issued by foreign corporations, foreign governments, their agencies and instrumentalities, foreign central banks or supranational organizations. The fund may enter into forward contracts, futures and options contracts and swap agreements to provide economic exposure similar to investments in sovereign and corporate emerging market debt or for hedging purposes. The fund considers emerging market countries to be the countries included in the JPMorgan Emerging Markets Bond Index Global. The fund's investments may be denominated in U.S. dollars, European euros, Japanese yen or the local currency of issue.
The fund's portfolio managers employ an investment process that uses in-depth fundamental country, issuer and currency analysis disciplined by proprietary quantitative valuation models. A "top down" analysis of macroeconomic, financial and political variables guides country, issuer and currency allocation. The portfolio managers also consider other market technicals and the global risk environment. The portfolio managers look for shifts in country fundamentals and consider the risk-adjusted attractiveness of currency, issuer and duration returns for each emerging market country. Using these inputs, the portfolio managers seek to identify the best opportunities on a risk-adjusted basis across emerging market debt instruments (including those issued by sovereign, quasi-sovereign and corporate issuers), currencies, and local interest rates.
The fund is not restricted as to credit quality when making investments in debt securities. The debt securities in which the fund may invest may be rated below investment grade ("high yield" or "junk" bonds) or the unrated equivalent as determined by the fund's sub-investment adviser. There are no restrictions on the average maturity of the fund's portfolio or on the maturities of the individual debt securities the fund may purchase. A bond's maturity is the length of time until the principal must be fully repaid with interest. Average effective portfolio maturity is an average of the maturities of bonds held by the fund directly and the bonds underlying derivative instruments entered into by the fund, if any, adjusted to reflect provisions or market conditions that may cause a bond's principal to be repaid earlier than at its stated maturity. Duration is an indication of an investment's "interest rate risk," or how sensitive a bond or the fund's portfolio may be to changes in interest rates.
Fixed Income Risks
The fund is subject generally to interest rate, credit, liquidity, prepayment and extension risk (as to mortgage-related holdings), call, sector, and market risks, to varying degrees, all of which are more fully described in the fund's prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes and rate increases can cause price declines.
High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuers perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity.
The fund may use derivative instruments, such as options, futures and options on futures, forward contracts, swaps (including credit default swaps on corporate bonds and asset-backed securities), options on swaps, and other credit derivatives. A small investment in derivatives could have a potentially large impact on the fund's performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets. Credit default swaps and similar instruments involve greater risks than if the fund had invested in the reference obligation directly, since, in addition to general market risks, they are subject to illiquidity risk, counterparty risk and credit risks.
Foreign Investment Risk
Foreign bonds are subject to special risks including exposure to currency fluctuations, changing political and economic conditions, and potentially less liquidity. Investments in foreign currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar. Foreign currencies are also subject to risks caused by inflation, interest rates, budget deficits and low savings rate, political factors and government control. The fixed income securities of issuers located in emerging markets can be more volatile and less liquid than those of issuers in more mature economies.
Investors should consider the investment objectives, risks, charges, and expenses of the fund carefully before investing. Download a prospectus, or a summary prospectus, if available, that contains this and other information about the fund, and read it carefully before investing.