American Funds Emerging Markets Bond Fund Class F-3 EBNGX

American Funds Emerging Markets Bond’s effectiveness in pulling a wide range of levers and the team’s consistent approach earn a Process rating upgrade to Above Average.

The fund’s process stems from the strategy’s multimanager structure, where portfolio managers collaborate closely with analysts, blending top-down inputs with valuation-based, fundamentally driven credit analysis. High-conviction ideas are shared across independently managed sleeves through constant debate and collaboration among managers, analysts, traders, and the independent risk group. The team maintains a long-term investment horizon, generally seeking positions with durable relative value rather than short-term dislocations, though it has flexibility to take advantage of a variety of opportunities across emerging-market debt. Risk management is deeply integrated in the process, with daily oversight of exposures, correlations, and tracking-error contributions.

Veteran emerging-market managers underpin this team effort. Kirstie Spence, Luis Freitas de Oliveira, and Robert Burgess each manage portfolio sleeves alongside an analyst-driven research portfolio sleeve. Managers' areas of expertise span local rates, corporate credit, and distressed debt, and are complementary to one another. A dedicated emerging-market research group supports the managers, consisting of regionally focused sovereign and corporate analysts, a cross-rates specialist, and a global trading team operating across time zones. Analysts add value as key idea generators through their fundamental research.

The portfolio provides broad emerging-market debt exposure across local- and hard-currency (US dollar) sovereigns and corporates, distinguishing it from other emerging-markets bond Morningstar Category peers who are more hard-currency-focused. The team maintains one of the highest local-currency exposures in the category by design, offering differentiated exposure to emerging-market debt. Sector and country weights shift based on analyst convictions and valuation signals, and the team has shown a willingness to maintain positions through volatility when a thesis remains intact—most recently in Brazil, where a large overweighting detracted heavily in 2024 before becoming the strongest contributor in 2025.

Despite bouts of short-term volatility, long-term performance is solid. Since inception, the fund’s R6 shares’ 3.8% annualized return through February 2026 outpaced two-thirds of category peers. Country selection is expected to generate 45% of excess return, while security selection and foreign exchange should generate 40% and 15%, respectively. Each of these areas has added value consistently throughout history. Long-term outcomes are strong, though investors should be prepared to withstand episodic volatility that can result from local-currency fluctuations and concentrated positions.

A disciplined, research-driven structure reflects the fund’s collaborative insights and its risk-aware design; consistent execution of this process earns a Process upgrade to Above Average from Average.

Capital Group applies its hallmark multimanager structure here. Each comanager oversees an individual sleeve in addition to an analyst-led research sleeve. Although each sleeve operates independently and has different starting points based on areas of manager expertise, the team maintains constant collaboration to ensure cohesive portfolio construction. High-conviction themes often appear across sleeves, while each manager’s distinct style emerges around the edges. Managers, analysts, and traders interact frequently to share ideas, debate views, and reassess positions, and the unique structure of the analyst team allows for several contributing perspectives when discussing relative value decisions. Typical factors are considered by analysts in their assessment of the attractiveness of a country’s currency, USD-denominated debt, and local debt, such as inflation, spread levels, economic policies, and debt levels, though the checks and balances on the team have proved effective.

Risk management is a defining strength and influences every stage of the process. An independent risk team includes folks dedicated to emerging-market debt, who monitor exposures daily and engage in ongoing dialogue with the managers. Their granular analysis of risk factors and correlations enables managers to target exposures with precision and understand how positions interact within the broader portfolio.

The resulting portfolio stands out within the emerging-market bond Morningstar Category for its higher local-currency exposure, which normally ranks near the top of the category. The team builds broad exposure across hard- and local-currency debt and across corporate and sovereign issuers, while many peers focus mainly on hard-currency sovereign bonds. Compared with a typical peer’s local-currency exposure that is less than 10%, the fund’s local-currency holdings edged up from 50% of assets at year-end 2024 to roughly 52% at year-end 2025 as the US dollar weakened. Hard-currency exposure fell near five-year lows at 43%, while corporate debt concluded 2025 below 12% of assets.

This benchmark-aware approach tracks a custom 50% JPMorgan Government Bond Index-Emerging Markets, 30% JPMorgan Emerging Markets Bond Index, and 20% JPMorgan Corporate Emerging Markets Bond Index benchmark. Each portfolio sleeve is managed with a defined tracking-error budget, and the managers allocate that budget flexibly, with oversight from the risk team. Corporate debt is typically underweight versus the blended benchmark, though the team rotates sector exposures based on relative value.

The team has consistently applied its discipline through volatile markets. In late 2024, Brazilian debt sold off amid fiscal concerns, and Brazil represented the portfolio’s largest country overweighting. Rather than selling the position at highly discounted prices, the team maintained the overweight exposure and even added to it in early 2025, given its investment thesis on the country had not changed. With some of that value realized, the team began trimming the overweighting while maintaining confidence in the outlook. Brazil exposure ended 2025 at under 9% of assets, down from more than 10% in March 2025.

A deep supporting bench strengthens an experienced management team, reinforcing an Above Average People rating.

Kirstie Spence is a 30-year industry veteran and the fund’s principal investment officer, responsible for the overall direction and performance of the strategy. Her presence since the strategy’s April 2016 inception is key to the fund’s consistent approach. Alongside Spence, Luis Freitas de Oliveira and Robert Burgess, who each have more than 35 years of industry experience, complete the management roster. Each manager brings complementary expertise to the fund. Spence specializes in local rates and currencies, Freitas de Oliveira brings a banking and equities background, which is especially useful for corporate credit opportunities, and Burgess, who joined the management team in December 2023, adds meaningful knowledge in distressed debt, defaults, and restructuring.

The emerging-markets debt analyst team provides key fundamental analysis of underlying issuers. The team’s growth supports a wider opportunity set; it now includes six sovereign analysts and six corporate analysts with region-specific coverage, along with a cross-rates specialist who applies a global lens, which is an especially useful perspective during relative value discussions. Seven traders, which is more than at most peers, operate across three continents to ensure continuous execution capabilities. Additional shared firm resources contribute to the strategy, namely a currency analyst and global foreign-exchange traders that provide macroeconomic input. A robust, independent risk management team provides further support.

Manager ownership reflects strong alignment with investors. Spence invests at least USD 1 million in the strategy, while Freitas de Oliveira and Burgess each invest between USD 100,000 and USD 500,000.

Capital Group stands out from the pack as it enhances capabilities around strong core competencies. It earns a High Parent rating.

Since 1931, Capital Group, parent of American Funds, has thoughtfully built out capabilities to become one of the world’s largest asset managers, managing more than USD 3 trillion dollars. Building on the success of its long-term-oriented, multiple-manager system for global equities, the firm has developed robust fixed-income and multi-asset units, each managing more than USD 500 billion. In January 2026, as part of its periodic review of its now five distinct research organizations, Capital Group implemented changes to its equity investment subsidiaries. This exercise resulted in most equity strategies having at least one portfolio manager change, but according to the firm, it better balances each of Capital Group’s three equity groups in terms of investment breadth and helps the firm better align leadership opportunities across the groups. These kinds of shifts have occurred before, with the last coming in 2018.

Capital Group has also turned its attention to some modern opportunities. To address public/private market convergence trends, it launched in April 2025 two semiliquid funds with private market giant KKR. In keeping with its signature portfolio management approach, it splits those funds into multiple sleeves, which are managed independently by distinct managers at each firm. Capital Group plans to deepen this relationship with target-date and model portfolios, as well as public/private equity funds. On the other end of the spectrum, although the firm is firmly dedicated to active management, it has also acknowledged investor preference for passive investing and has thus partnered with indexing stalwarts Vanguard, BlackRock, and Schwab on active/passive models. Capital Group’s proven investment prowess, strong reputation among investors, and scale mean it can be selective with its partnerships.

In addressing another recent trend, since early 2022, the firm has launched more than 25 active exchange-traded funds globally, most of which are distinct, but several are similar to some of its legacy American Funds mutual funds. Unlike some of its peers, though, it has not filed for SEC exemptive relief to offer ETFs as a share class.

That’s a lot of change for such a storied and sizable firm, but Capital Group has a long history of serving investors well.

Long-term performance is solid, though the fund’s relative standing has swung sharply in recent years from periods of short-term volatility.

The fund posted its weakest calendar-year result relative to peers in 2024. It finished at the bottom of the category and trailed the peer median by 651 basis points. A high-conviction overweighting in Brazilian debt and the country’s currency drove much of this shortfall. The team was early to this position, as Brazilian assets sold off in late 2024 amid fiscal concerns that prompted significant interest rate hikes. A strengthening US dollar in 2024 also hurt relative results.

Performance rebounded meaningfully in 2025. The team maintained its conviction in Brazilian debt and, as such, rewarded investors as the debt recovered strongly. The R6 shares returned 16.3% in 2025, placing the fund in the category’s top quintile.

The fund can experience bouts of volatility and short-term underperformance. Investors should expect the strategy to lag when local currencies sell off, as seen in mid-2018, given the portfolio’s higher local-currency exposure versus peers. On the flip side, when the US dollar weakens, as it did in 2025, this fund should be positioned well to benefit. During broad risk-off episodes—such as late 2018 or early 2023—the fund has typically outperformed.

Over longer time horizons, results are competitive. Since its June 2016 inception, the R6 shares’ 3.8% annualized return through February 2026 outperformed two-thirds of emerging-markets bond Morningstar Category peers. The fund’s risk-adjusted performance, measured by its Sharpe ratio, showed a similar advantage.

American Funds Emerging Markets Bond F3's Prospectus Adjusted Expense Ratio is 0.54% per year. It places it in the cheapest quintile of the Morningstar US Fund Emerging Markets Bond Category, where the median fee is 0.86% per year. This cost positioning translates into a Medalist Rating Price Score of 1.88, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.