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Tapping Emerging Market Bond and Currency Funds
CNBC.com | October 03, 2011 | 09:31 AM EDT

Specifically, Genworth seeks out managers who look for opportunities in economies that are growing faster than that of the U.S., and have strong reserves backing their currencies, which allows for currencies to appreciate, Wright says. “Many of those economies are tied to the Chinese currency.”

Brian Gendreau, market strategist at Cetera Financial Group, agrees foreign bonds may provide opportunities now.

“PIMCO has for some time been arguing that it makes sense in this environment to avoid bonds of developed countries with high debt loads and paralyzed policy-making bodies in favor of bonds of countries not in that situation,” Gendreau says. “Bonds of Australia, Canada, Switzerland, and many of the emerging markets come to mind in this regard.”

But, Gendreau notes, emerging market local-currency bonds haven’t performed well lately.

UBS also cautions that flows into emerging market local currency bonds have been so robust lately that ironically, the trend could lead to trouble.

“This is now the one consensus overweight in the (emerging market) world, and clearly the one crowded foreign trade,” Anderson writes.

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