Some of the fastest growing regions in the world are labeled "emerging markets." For many years, investors treated emerging markets as risky assets. Investors began tiptoeing lightly into the market, viewing the opportunities as a way to diversify portfolios. Today, emerging markets—and in particular, emerging market bonds—are an exciting asset class all of on their own. Payden & Rygel's Emerging Market Bond strategy can contribute additional absolute returns as a stand-alone investment vehicle or it can be combined with other strategies to provide diversification and potentially enhance returns.

The firm’s strategy utilizes a top-down process that begins with assessing country risk, often accompanied by frequent research trips to emerging-market countries in Latin America, Europe and Asia. We value countries with improving fundamentals based on a thorough screening of their macroeconomic variables and sovereign credit ratios, political stability, and the quality of the country’s business environment. The firm generally purchases primarily dollar-pay or euro-pay bonds issued by governments and corporations, and may opportunistically buy local currency bonds. Government bonds are the primary focus of the strategy; corporate bonds are used opportunistically, and normally do not make up more than 20 percent of the portfolio.

Careful consideration of both regional and country diversification minimizes volatility versus conventional emerging market indices, such as the JP Morgan EMBI Plus, which tend to be heavily concentrated in Latin America and in a few countries.

Benchmark	EMBI Global Diversified Index
Securities Employed	Sovereign and corporate bonds of emerging market countries
Maturity Range	1 - 30 years
Duration Range	5.0 - 7.0 years
Average Credit Quality	BBB-