The Top 5 Global Bond Funds

Global bond funds have become more popular among investors over the years. Typically, bond funds invest in the corporate and government debt securities of developed nations. However, bond funds containing holdings from emerging market economies have also grown in popularity. Investors seeking yield often migrate to bond funds as they search for a steady income stream. Bonds are fixed-income debt instruments that companies and governments issue to raise funds, and in return, usually pay investors a fixed rate of interest.

Unfortunately, 2020 was met with challenges due to the global crisis and the resulting recession or negative economic growth. The Federal Reserve expanded monetary policy by cutting interest rates, purchasing corporate bonds, and providing relief to businesses through its lending and credit programs.

There continues to be heavy demand for bonds and bond funds as risk-averse investors pour money into the bond markets and a need for portfolio diversification between domestic and international stocks, bonds, and other asset classes. There is also a wave of democratization of investments that enabled newer swaths of the population to enter the investment space. Still, there are several bond funds with international exposure that can provide investors with solid options.

1. Fidelity Global Credit Fund (FGBFX)

The Fidelity Global Credit Fund (FGBFX) invests in corporate bonds issued throughout the world, in which 80% of the fund's assets are in debt securities of all types. The Fidelity Investments fund primarily invests in investment-grade debt securities, of which 74% are international, and 26% are in U.S. debt instruments.

The fund is also open to currency exchange risk and hedges the foreign currency exposures utilizing forward contracts, which are contracts that can lock in the exchange rate. Below are some of the characteristics and costs to the fund:

• Expense Ratio: 1.10% as of Feb. 29, 2020
• 30-Day SEC Dividend Yield: 1.46% as of Dec. 31, 2020
• Assets Under Management: $119 billion as of Dec. 31, 2020
• Inception Date: 05/22/2012

The fund's top five allocation weightings by country (as of Nov. 30, 2020) are as follows:

• United States: 43.44%
• Germany: 20.58%
• France: 6.15%
• United Kingdom: 6.03%
• Switzerland: 4.15%

The fund has an average weighted maturity of 6.50 years as of Dec. 31, 2020, and contains 194 holdings as of Sept. 30, 2020. There is no minimum investment amount.

2. Templeton Global Bond Fund (TPINX)

The Templeton Global Bond Fund (TPINX) seeks to provide current income and capital appreciation, and growth by investing at least 80% of assets in governmental and agency bonds around the world. The portfolio managers of Franklin Templeton Investments look for investment opportunities across currencies and interest rates for reasonable returns, as well as substantial portfolio diversification.

Below are some of the characteristics and costs to the fund:

• Expense Ratio: .99% as of May 01, 2020.
• 30-Day SEC Dividend Yield: 2.13% as of Dec. 31, 2020.
• Assets Under Management: $16 billion as of Nov. 30, 2020
• Inception Date: Sept. 18, 1986

Please note that funds with higher expense ratios can eat into performance over time. However, anything below 1.0% is generally appropriate for most investors.

The fund has an average weighted maturity of 2.42 years and contains 213 holdings as of Dec. 31, 2020. The fund has 91.94% of its assets invested in international fixed income securities, with the remaining amount held in cash.

The top five allocation weightings by country (as of Nov. 30, 2020) are as follows:

• United States: 24.30%
• Mexico: 17.33%
• Japan: 12.25%
• Indonesia: 10.52%
• South Korea: 7.78%

The fund has a $1,000 minimum investment amount.

3. PIMCO Global Bond Fund Unhedged (PIGLX)

Pimco Global Bond Fund Unhedged (PIGLX) focuses on investing in high-quality, developed countries around the world. The fund is managed by the Pacific Investment Management Company LLC (PIMCO). It's important to note that the PIGLX is designed for the more affluent investor since it has a $1 million initial investment requirement.

The primary benchmark that the fund’s holdings are based on is the Bloomberg Global Aggregate (USD Unhedged) Index, which has exposure in the U.S., Pan-European, and the Asian-Pacific markets.

The fund seeks to provide exposure to multiple economies, including developing countries denominated in global currencies. The fund is designed to provide exposure to global bond markets while allowing for currency exchange rate appreciation. In other words, the fund does not hedge currency exposure. Although exchange rates can move and add to the fund's return, the currency volatility can also reduce returns.

Below are some of the characteristics and costs to the fund:

• Expense Ratio: .67% as of July 31, 2020
• 30-Day SEC Dividend Yield: 1.34% as of Nov. 30, 2020
• Assets Under Management: $195 billion as of Sept. 30, 2020
• Inception Date: Nov. 23, 1993

The top five allocation weightings by country (as of Nov. 30, 2020) are as follows:

• Italy: 19.24%
• Australia: 15.70%
• United States: 15.67%
• Spain: 13.19%
• Denmark: 9.42%

The fund has over 665 bond holdings with an effective maturity of 6.21 years as of Sept. 30, 2020. Over 49% of the bonds in the fund have maturities of five to 7 years.

4. AB Global Bond Fund (ANAGX)

The AB Global Bond Fund (ANAGX) invests in fixed-income securities from developed and emerging markets. The ANAGX is designed to generate income with the preservation of capital. The fund looks for opportunities in multiple sectors and has 1,019 holdings as of Nov. 30, 2020.

Below are some of the characteristics and costs to the fund:

• Expense Ratio: .56% as of Jan. 31, 2020
• 30-Day SEC Dividend Yield: 1.27% as of Dec. 31, 2020
• Assets Under Management: $7 billion as of Nov. 30, 2020
• Inception Date: Nov. 05, 2007

The top five allocation weightings by country (as of Nov. 30, 2020) are as follows:

• United States: 37.40%
• Japan: 15.33%
• China: 8.75%
• United Kingdom: 6.36%
• Australia: 5.45%

Over 60% of the holdings are in bonds from global governments and investment-grade corporate debt. The average maturity for the bond holdings is 9.53 years, and the initial minimum investment is $2,500.

5. DFA 5-Year Global Fixed Income Fund (DFGBX)

The Dimensional Fund Advisors (DFA) 5-Year Global Fixed Income Fund (DFGBX) seeks to provide a market rate of return with low volatility for returns. As the name of the fund indicates, it invests in both U.S. and foreign debt securities with maturities of five years or less. The shorter length of maturity means the fund can experience less volatility. If bonds in a fund have a longer maturity, there is greater interest rate risk, meaning the rates in the market could increase and outperform the rates in the fund.

Below are some of the characteristics and costs to the fund:

• Expense Ratio: .26% as of Dec. 31, 2020
• 30-Day SEC Dividend Yield: -.26% as of Dec. 31, 2020
• Assets Under Management: $13.4 billion as of Dec. 31, 2020
• Inception Date: Nov. 06, 1990

The top five allocation weightings by country (as of Sept. 30, 2020) are as follows:

• Canada: 20.32%
• Supranational countries: 18.77% (such as the European Union)
• France: 9.68%
• Netherlands: 8.78%
• Germany: 7.36%

The fund has 322 holdings that include government and corporate debt instruments with an average maturity of .94 years. There is no minimum initial investment amount.