Fund Commentary for the fourth quarter 2013 from
The emerging markets debt asset class experienced periods of volatility and generated mixed results during the fourth quarter of 2013. The quarter began on a positive note, as investor sentiment remained positive following the US Federal Reserve Board's (the "Fed") surprise decision in September to delay the tapering of its asset purchase program. However, a portion of those gains were given back in November, as US economic data was largely positive and rates moved higher. In addition, investor sentiment for the asset class was impacted by concerns regarding
For the fourth quarter of 2013, the Fund posted a net asset value total return of -1.01%, and a market price total return of -1.64%. On a net asset value basis, the Fund underperformed its benchmark, the Global High Income Fund Index (the “Index”)1 ,which declined 0.31% for the quarter.
The Fund's allocation to longer-term Brazilian local debt was a drag on results.
The Fund's underweights to a number of countries contributed to performance. In particular, our underweight to local Indonesian debt was beneficial for results, as it performed poorly given the country's rising current account deficit. An underweight to US dollar-denominated and local Turkish debt was positive as well for the Fund's results, as they were also dragged down by the country's mounting current account deficit, as well as political unrest toward the end of the quarter. Our limited exposure to
We continue to have a neutral near-term outlook for the emerging markets asset class. In recent months there has been mounting evidence that the growth in many developing countries has decelerated. In some countries, this has led to growing current account deficits. Looking ahead, this could negatively impact their currencies and put further strains on their economies. Continued rising US Treasury yields could also adversely affect the asset class in 2014, although we believe that the impact will be less severe than was the case last year. We maintain our positive long-term outlook for the emerging markets asset class. While it may take some time, we expect growth in emerging market countries to once again surpass their developed country counterparts.
Portfolio statistics as of
Top ten countries (bond holdings only)4
|Percentage of net assets|
|Top ten currency exposures (includes all securities and other instruments)|
Percentage of net assets
|United States Dollar||53.5%|
|South African Rand||2.6|
|Credit quality5||Percentage of net assets|
|Cash and other assets, less liabilities||2.2|
|Net asset value per share6|
|Market price per share6|
|NAV distribution rate (DR)6||6.97%|
|Market distribution rate (DR) 6||7.98%|
|Duration 7||5.99 yrs|
|Weighted average maturity||8.7 yrs|
1 Global High Income Fund Index is an unmanaged index compiled by the advisor, currently constructed as follows: 50% JP Morgan Emerging Markets Bond Index (EMBI Global) and 50% JP Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM Global Diversified). Investors should note that indices do not reflect the deduction of fees and expenses.
2 "Spreads" refers to differences between the yields paid on US Treasury bonds and other types of debt, such as emerging markets bonds.
3 The Fund’s portfolio is actively managed, and its portfolio composition will vary over time.
4 Excludes exposures obtained via derivatives (e.g., swaps).
5 Credit quality ratings shown in the table are based on those assigned by Standard & Poor’s
6 Net asset value (NAV), market price and distribution rates will fluctuate. NAV distribution rate (DR) is calculated by multiplying the current month’s distribution by 12 and dividing by the month-end net asset value. Market distribution rate (DR) is calculated by multiplying the current month’s distribution by 12 and dividing by the month-end market price.
7 Duration is a measure of price sensitivity of a fixed income investment or portfolio (expressed as % change in price) to a 1 percentage point (i.e., 100 basis points) change in interest rates, accounting for optionality in bonds such as prepayment risk and call/put features.
Any performance information reflects the deduction of the Fund’s fees and expenses, as indicated in its shareholder reports, such as investment advisory and administration fees, custody fees, exchange listing fees, etc. It does not reflect any transaction charges that a shareholder may incur when (s)he buys or sells shares (e.g., a shareholder’s brokerage commissions).
Disclaimers Regarding Fund Commentary -The Fund Commentary is intended to assist shareholders in understanding how the Fund performed during the period noted. The views and opinions were current as of the date of this press release. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the Fund and UBS Global AM reserve the right to change views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund’s future investment intent.
Past performance does not predict future performance. The return and value of an investment will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost.
Investing in the Fund entails specific risks, such as interest rate risk and the risks associated with investing in the securities of issuers in emerging market countries.The value of the Fund's investments in foreign securities may fall due to adverse political, social and economic developments abroad and due to decreases in foreign currency values relative to the US dollar.Investments in emerging market issuers may decline in value because of unfavorable government actions, greater risks of political instability or the absence of accurate information about emerging market issuers. Further detailed information regarding the Fund, including a discussion of principal objectives, principal investment strategies and principal risks, may be found in the fund overview located at http://www.ubs.com/closedendfundsinfo. You may also request copies of the fund overview by calling the Closed-End Funds Desk at 888-793 8637.
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