Carlson says that a major reason to own emerging bonds is to diversify fixed-income portfolios. His fund has holdings in more than 50 countries, including Argentina, Ghana, and Turkey. Those countries all present risks, but the outlook for the U.S. is also uncertain, says Carlson. "Instead of having all your holdings in one country, it makes sense to diversify globally," he says. Emerging market bonds make sound diversifiers because they don't necessarily move in lockstep with Treasuries. As the financial crisis unfolded, investors sold emerging market bonds and fled to the safety of long Treasuries. During 2008, long government funds returned 27.7%, while emerging market bond funds lost 17.6%. But then the roles reversed as investors gained more confidence and interest rates rose. In 2009, long government funds lost 17.5%, while emerging bond funds gained 32.4%. Carlson's broadly diversified approach has proved fruitful. During the past decade, the fund has returned 11.9% annually, outdoing 74% of peers. But Carlson doesn't excel every year. In 2010, he trailed most competitors as prices of low-quality bonds soared and local currencies appreciated against the dollar.