Pick: South Korean and Malaysian Bonds
When it comes to bonds, investors tend to favor debt issued by their own countries. Not Michael Hasenstab of Templeton's $61 billion global bond fund (TPINX). He has lately steered clear of U.S. government debt, and the move has paid off. His fund has a three-year annualized return of 7% and a 10-year return of 10.4% (putting him in the top 1% of his category). Morningstar's 2010 bond fund manager of the year, Hasenstab is now mentioned in the same breath as heavyweights like Pimco's Bill Gross. Right now Hasenstab is gravitating to emerging-market debt. Even short-term government bonds in these regions offer yields in the mid-single digits, so he can avoid the added risk of longer-maturity bonds. Equally important, creditworthiness has improved significantly. Hasenstab has been scooping up bonds issued by the governments of South Korea and Malaysia. But buying such bonds directly is tricky, not least because Hasenstab contends they should be purchased in local currency. As with mortgage bonds, they're best acquired inside a diversified managed fund.
--K.B.
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