The hottest bond funds on the market, emerging-market debt funds offer better returns than most domestic funds and a way to play the falling dollar. But are investors taking on more risk than they realize?
Investors have poured more than $1.7 billion into emerging-market bond funds over the past four weeks, more than any other fixed-income fund category, according to fund researcher Lipper Inc. So far this year, these funds, which invest in government and corporate debt from developing nations like Mexico, Brazil and Russia, have seen inflows of $11.4 billion, up 20% from a year earlier. "A larger portion of portfolios that have historically been dominated by developed countries are increasingly flowing to emerging markets," says Ramin Toloui, one of the leaders of the emerging markets portfolio management team for Pimco.
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