Neuberger Berman Short Duration Emerging Market Debt Fund – Low IG volatility for EM exposure

Data as of 30 June 2026
Source: Neuberger Berman, iFAST compilations

Country exposure leans towards the Gulf and Latin America (Chart 2). Saudi Arabia (8.9%) and the United Arab Emirates (7.8%) together account for a sixth of the portfolio, followed by Colombia (6.8%), Mexico (6.1%) and Brazil (5.4%). The Gulf weighting reflects where short-dated, higher-quality paper is available in size – the region’s state-owned issuers and entities with strong government support sit among the better-rated borrowers in the emerging market universe. While geopolitical risks linger due to the US-Iran conflict, the fund believes the strong fundamentals of these Gulf countries support their short-dated papers.

Chart 2: Gulf sovereigns and Latin America lead country exposure 

Data as of 30 June 2026
Source: Neuberger Berman, iFAST compilations.

The top 10 issuers accounted for 26.2% of the portfolio, with positions ranging from 1.4% to 4.9% (see Table 1 below), with governments dominating the mix. You will spot names on that list that make people nervous: Argentina and Sri Lanka have both defaulted within the past decade. Both were among the fund’s strongest contributors last quarter, which highlights the point: the fund buys recovering credits when it believes the improvement is real and the price has not caught up. In the second quarter, the managers added Argentine sovereign bonds on improving reserves, bought into Hungary and Colombia after market-friendly election outcomes, and took part in a new three-year issue from Saudi Arabia's sovereign wealth fund, while exiting the Dominican Republic and trimming Ecuador, El Salvador and Uzbekistan.

Table 1: Top 10 issuers are led by sovereigns

Short duration with diversified credit exposure

Looking at Table 2 below, we find a fund that is built to earn income, with scope for capital appreciation. As of 30 June 2026, it holds 373 bonds yielding 5.81% to maturity at an average duration of 2.70 years.

While the overall credit rating is BBB-, we flag that just under half the portfolio (49.4%) sits below investment grade, including 4.1% in CCC-rated bonds, reflecting a diversified fund rather than a conservative one. This portfolio allocation is what helped the fund to deliver a strong 8.05% annualised return over the last three years, comfortably surpassing the benchmark’s 4.64%, with annualised volatility running at 2.62% and a Sharpe ratio of 1.18x. However, this three-year window beginning in mid-2023 excludes the 2022 drawdown entirely – the longer-run figures discussed below are the more representative test.

Fundamentals remain supportive: emerging economies are growing roughly two percentage points faster than developed ones, upgrades have outnumbered downgrades for two years, and corporate earnings momentum is the strongest in years. But with spreads this tight, avoiding the credits that deteriorate matters at least as much as identifying the ones that improve.

Table 2: Fund as of 30 June 2026

Track Record: Delivering Consistent Risk-Adjusted Returns

Since launching in December 2013, the fund (USD A Accumulating share class) delivered a net annualised return of 3.04%, comfortably ahead of the benchmark's 1.88%, despite navigating multiple market cycles — the COVID-19 pandemic, the 2022 global bond selloff and recent geopolitical turbulence among them. A US$100 investment in the fund would have grown to US$146, compared to US$126 generated by sticking to the 3-month T-Bill index (see chart 3 below).

In the past decade, only two of the calendar years experienced negative returns, though only one seriously so (see chart 4 below). 2021 returned -0.57% as front-end US yields drifted higher towards the end of the year, alongside markets pricing in rate hikes due to elevated inflation. 2022 dealt a heavier blow, with the fund falling 7.53% due to a confluence of events: rising rates, widening spreads, and a run of emerging market defaults hitting simultaneously, against a backdrop of the Chinese property crisis that had been rippling through Asian credit markets since 2021. Rather than making dramatic tactical shifts, the managers remained steadfast to their process and continued focusing on issuers with resilient fundamentals — an approach that supported the Fund's subsequent recovery, with three calendar years of returns of 7.55% (2023), 8.33% (2024) and 8.66% (2025). The fund’s deepest fall was a peak-to-trough drawdown of 13.3% from September 2021 to October 2022. From that low, it took around 19 months to recover the lost ground and set a new high in May 2024.

Chart 3: Growth of US$100 Since Inception

Data as of 30 June 2026
Source: Neuberger Berman, iFAST compilations.

This performance has not been bought with excessive risk. As shown in Chart 4 below, annualised volatility across the past 3 years, 5 years, and since inception (measured on the Neuberger Short Duration Emerging Market Debt composite) stood at 2.62%, 3.96% and 4.29%, respectively. We note that this represents a narrow band for a portfolio drawing on emerging market credit, especially for a fund that owns, on paper, risky credits such as Argentina and Sri Lankan bonds.

Furthermore, we highlight that this steadiness is characteristic of the sub-asset class. As Chart 4 below also shows, since 2003, on an index level, short-duration emerging market debt has been the calmest corner of the asset class at 4.2% annualised volatility – roughly half the 8.7% of hard-currency EM sovereigns, and 8.2% for EM corporates. The fund also ranks well in terms of risk-adjusted returns since inception, with a Sharpe ratio of 0.73 against 0.54 for hard-currency sovereigns and 0.48 for EM corporates.  Correlation is also the lowest against US Treasuries for any emerging market debt category at 0.14x, underpinning the case for the fund’s diversification against US 3M T-bills.

This diversification shows up most clearly when markets fall. Across the five largest drawdowns in hard-currency emerging market debt between January 2003 and December 2022 — the 2004 Fed hiking cycle, the 2008 global financial crisis, the 2013 taper tantrum, the 2020 Covid crash and the 2021–22 rate shock — short-duration bonds fell less than hard currency, local currency and corporate emerging market debt. The reason is mechanical rather than clever: as a bond approaches repayment, its price is pulled back towards face value regardless of what sentiment is doing elsewhere.

Chart 4: Fund has low volatility across time periods 

*Fund volatility figures represent the Neuberger Short Duration EMD composite, net of fees
** Sub-asset classes proxied by JPM EMBI Global Diversified (hard currency), JPM CEMBI Diversified (corporates), JPM GBI-EM Global Diversified (local currency), and 1–3 year blends (short duration);
Data as of 31 May 2026
Source: Neuberger Berman, iFAST compilations.

This fund provides good long-term returns with consistent low volatility for emerging markets exposure

No single bond strategy performs well in every environment, and this Fund is best viewed not as a replacement for traditional allocation to cash, but as a complement that broadens an investor's sources of income and diversification.

Its short duration dampens sensitivity to interest-rate movements, while diversified exposure across sovereigns, quasi-sovereigns and corporates allows investors to participate in the yield premium emerging markets offer over similarly rated developed market credits — without relying on concentrated high-yield positions. Historically, the sub-asset class has also exhibited the lowest correlation to US Treasuries of the major EMD sectors (see table 3 below), adding a diversification dimension to the income story.

Emerging market debt will inevitably experience bouts of volatility, particularly during episodes of geopolitical stress or spread widening, and capital remains at risk. But the Fund's emphasis on fundamental research, broad diversification and downside resilience has helped it navigate successive market cycles while compounding competitive risk-adjusted returns. 
For investors looking beyond developed-market fixed income, we believe it offers a compelling proposition: attractive income without taking on the full risks typically associated with emerging-market debt.

The fund is currently available in multiple share classes, covering A (accumulating) and A (distributing). The former is only available in USD, while the latter is available in both USD (A MDIS USD) and SGD-hedged (A MDIS SGD-H).  The distributing share classes have monthly distributions, with annualised distribution rates at 6.59% for A MDIS USD, and 6.69% for A MDIS SGD-H. All share classes mentioned are available for subscription via cash and SRS.

Table 3: Correlation between US Treasuries and major EMD sectors