Emerging market bonds are anticipated to perform well this year due to a weaker US dollar, according to BlackRock's chief of EM debt, with new funds launched to attract investor interest. However, experts caution that tight yield spreads and the choice between local and hard-currency debt present risks, suggesting that EM debt should only constitute a small portion of an investment portfolio.
For an investor focused on asset allocation and diversification, consider a strategic "satellite exposure" to emerging market bonds, limited to 2% to 10% of your portfolio. With a weaker US dollar potentially buoying emerging market bonds, you might explore funds like the iShares $ EM Bond Active Ucits ETF (ISOV) or larger ETFs such as the iShares JPMorgan USD Emerging Markets Bond ETF (EMB) for this exposure, while being mindful of the inherent risks and tight yield spreads.