Fund Commentary for the second quarter 2014 from
The emerging markets debt asset class was among the best-performing segments of the bond market during the quarter. The segment benefited from strong investor demand, declining US Treasury yields and some signs of stabilization in
For the second quarter of 2014, the Fund posted a net asset value total return of 4.89%, and a market price total return of 7.04%. On a net asset value basis, the Fund outperformed its benchmark, the
The Fund posted a positive return for the second quarter, slightly beating its benchmark. An overweight in emerging market local currencies versus US dollar-denominated debt was not beneficial as the latter outperformed the former. From a country perspective, an overweight in
On the upside, the Fund's overweight allocations to a number of higher beta (high risk) countries contributed to performance. In particular, our exposures to US dollar-denominated debt from
Several changes were made to the portfolio during the quarter. We reduced the Fund's overweight exposure to Russian US dollar-denominated debt in June given spread tightening and continued geopolitical uncertainties. We also reduced the Fund's US dollar risk exposure during the quarter in order to take some profits after spread tightening.
Many emerging markets countries are experiencing growth well above their major developed country counterparts, although the former are not immune to global developments. We expect to see emerging market growth rates moderate somewhat in 2014, based on lower exports to developed markets. However, advantages in terms of growth and relatively low fiscal deficits are favorable for debt dynamics in emerging markets countries on a longer-term horizon. That said, in the short-term we are less favorable on the asset class and feel that volatility within the asset class could remain elevated in the near term due to market uncertainty and investor risk aversion. But overall we continue to have a positive long-term outlook for emerging market investments. Solid fundamental data, stable reserves, a stronger fiscal situation and lower indebtedness are signs of such strengths, especially for emerging market sovereigns, quasi-sovereigns and currencies.
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)5|
Percentage of net assets
|United States Dollar||51.6%|
|South African Rand||3.2|
|Credit quality6||Percentage of net assets|
|Cash and other assets, less liabilities||2.6|
|Net asset value per share7|
|Market price per share7|
|NAV distribution rate (DR)7||5.99%|
|Market distribution rate (DR)7||6.77%|
|Weighted average maturity||8.4 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 “Spread” refers to differences between the yield paid on US Treasury bonds and other types of debt, such as corporate or emerging market 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 Forward foreign currency contracts are reflected at unrealized appreciation/depreciation; this may not align with the risk exposure described in the portfolio commentary section which reflects forward foreign currency contracts based on contract notional amount. As of the most recent period end,
6 Credit quality ratings shown in the table are based on those assigned by Standard & Poor’s
7 Net asset value (NAV), market price and distribution rates will fluctuate. NAV distribution rate (DR) is calculated by multiplying the current month’s regular monthly distribution by 12 and dividing by the month-end net asset value. Market distribution rate (DR) is calculated by multiplying the current month's regular monthly distribution by 12 and dividing by the month-end market price.
8 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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Closed-End Funds Desk: 888-793 8637