Global high income fund inc. – fund commentary
New york--(business wire)--global high income fund inc. (the "fund") (nyse: ghi) is a non-diversified, closed-end management investment company seeking high current income and, secondarily, capital appreciation through investments primarily in securities of emerging market debt issuers. fund commentary for the first quarter 2011 from ubs global asset management (americas) inc. (“ubs global am”), the fund’s investment advisor market review during the first quarter of 2011, us dollar-denominated emerging markets debt posted a positive return, but lagged its local markets counterpart. the first quarter was mainly characterized by two global events, the political unrest in the middle east, which negatively impacted investments in that region, and the disaster in japan, which ultimately did not have any significant direct influence on emerging markets debt. however, the events in the middle east helped trigger sharply rising oil prices, which further fueled inflationary fears. it also resulted in increased volatility in the fixed income markets in those countries embroiled in political turmoil. january’s losses were partially mitigated later in the quarter, when, subsequently, yields became relatively stable, supported by a higher yield differential between emerging and developed markets. in addition, solid economic growth in most emerging countries resulted in local market currency appreciation and became the main contributor to overall performance in the first quarter. performance review for the first quarter of 2011, the fund posted a net asset value total return of 2.08%, and a market price total return of -1.29%. on a net asset value basis, the fund outperformed its benchmark, the global high income fund index1 (the “index”), which returned 1.94% for the quarter. the fund maintained an underweight versus the index to usd-denominated emerging markets debt; however, the fund maintained an overweight allocation to high beta (high risk) countries (e.g., ecuador, venezuela, ukraine) and russian quasi-sovereign debt.2 this position contributed positively to results. in local market investments, the fund's long duration position in brazil detracted from performance as inflation fears caused its local yields to rise sharply. overweight positions versus the index in local currencies contributed the most during the quarter, particularly in march, when risk aversion abated somewhat and rate hikes in emerging market countries supported these currencies. for us dollar-denominated bonds, as well as for local yields exposure, we continue to prefer higher beta countries (venezuela, argentina) and currencies (indian rupee, brazil real and turkish lira). outlook we continue to have a positive long-term outlook for emerging market investments. volatility may stay elevated in the near term due to market uncertainty and investor risk aversion. however, we feel that demand for these securities has been supported by investors' search for higher yielding securities. although usd spreads are already at lower levels, a low global yield environment, as well as generally strong investor demand, may lead to further spread tightening.3 strong fundamental data, including stable reserves, a more solid fiscal situation and lower indebtedness, coupled with an attractive yield difference between emerging and developed markets, may further support the appreciation trend for emerging market currencies. disclaimers regarding fund commentary - the fund commentary is intended to assist shareholders in understanding how the fund performed during the period noted. 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. any fund net asset value ("nav") returns cited in a fund commentary assume, for illustration only, that dividends and other distributions, if any, were reinvested at the nav on the payable dates. any fund market price returns cited in a fund commentary assume that all dividends and other distributions, if any, were reinvested at prices obtained under the fund's dividend reinvestment plan. returns for periods of less than one year have not been annualized. returns do not reflect the deduction of taxes that a shareholder would pay on fund dividends and other distributions, if any, or on the sale of fund shares. 1 global high income fund index is an unmanaged index compiled by the advisor, currently constructed as follows: 50% j.p. morgan emerging markets bond index global (embi global) and 50% j.p. 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 quasi-sovereign bonds are securities issued by entities supported by the local government. 3 “spreads” refers to differences between the yields paid on us treasury bonds and other types of debt, such as emerging market bonds.
