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 markets debt issuers.
Fund Commentary for the fourth quarter 2011 from UBS Global Asset Management (Americas) Inc. (“UBS Global AM”), the Fund’s investment advisor
During the fourth quarter, US dollar-denominated emerging markets debt, as measured by the JP Morgan Emerging Markets Bond Index Global (EMBI Global), posted a return of 5.12%. Local market investments (in other words, emerging markets debt denominated in the currency of the issuer) posted weaker results, finishing the quarter with a return of approximately 0.48%, as measured by the JP Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM Global Diversified).
After a negative third quarter, October saw a rally in higher risk assets as somewhat less risk-averse investors began searching for yield. US dollar-denominated emerging markets debt spreads tightened significantly in October.
However, with growing concerns about the ability of European institutions to solve the sovereign debt crisis, investor confidence weakened in November. In addition, an increase in new issuance volume toward the end of the month weighed on the markets. The markets closed out the year with less liquidity, as December brought renewed concerns for the global economy, the banking sector and the situation in Europe.
For the fourth quarter of 2011, the Fund posted a net asset value total return of 3.42%, and a market price total return of 4.72%. On a net asset value basis, the Fund outperformed its benchmark, the Global High Income Fund Index (the “Index”),
which returned 2.79% for the quarter.
During the quarter, the Fund's overweight exposures to high beta (high risk) countries such as Venezuela and Argentina were a positive for performance, as their US dollar-denominated bond spreads narrowed during the period. The Fund's allocation to quasi-sovereign bonds
also benefited results. Elsewhere, long duration in local currency-denominated bonds in Brazil and South Africa, as well as a short duration exposure in Hungary, were rewarded.
Currency exposures, overall, detracted from results. In particular, the Fund's exposures to the Brazilian real, Serbian dinar and Indian rupee were negative for performance. This more than offset the positive contributions from the Fund's underweight allocation to the Hungarian forint. Underweights to high quality US dollar-denominated bonds in Mexico, Panama and Uruguay were also not rewarded.