Top 5 International Bond Mutual Funds - Best of Funds

International bonds represent nearly 60% of the fixed-income investment opportunities worldwide. This category includes bond issues from emerging economies and non-government entities. Since interest rate fluctuations differ from country to country, international bonds help to balance downturns in domestic markets. This is because this class of funds shows little correlation with domestic equities and only moderate correlation with investment grade domestic debt. Further they help in diversifying currency exposure and protect assets against a long-term decline in the U.S. dollar

Below we will share with you 5 top rated international bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all international bond funds, then click here.

GMO International Bond III (GMIBX) seeks to outperform its benchmark, the J.P. Morgan Non-U.S. Government Bond index. The majority of the fund's assets are utilized to invest in bonds, either directly or through other GMO funds or derivatives. The international bond mutual fund returned 20.19% in the last one year period.

Thomas Cooper is the fund manager and he has managed this international bond mutual fund since 1993.

Columbia Emerging Markets Bond A (REBAX) invests the majority of its assets in emerging market securities with generate fixed income. The fund may also consider for investment companies which derive a significant portion of their revenues from emerging markets. The international bond mutual fund has a three year annualized return of 11.37%.

The international bond mutual fund has a minimum initial investment of $2,000 and an expense ratio of 1.31% compared to a category average of 1.32%.

Dreyfus International Bond A (DIBAX) seeks capital growth and income. The fund invests at least 65% of its assets in foreign securities not denominated in U.S. dollars. Not more than 25% of its assets are utilized to purchase emerging markets securities. The international bond mutual fund returned 15.53% in the last one year period.

David Leduc is the fund manager and he has managed this international bond mutual fund since 2006.

PIMCO Developing Local Markets A (PLMAX) invests a large proportion of its assets in fixed-income securities denominated in currencies of emerging markets or these currencies themselves. Not more than 15% of the fund's assets may be utilized to purchase high-yield securities. The international bond mutual fund has a five year annualized return of 5.72%.

As of December 2010, this international bond mutual fund held 193 issues, with 12.04% of its total assets invested in Pimco Fds Private Account Portfolio Ser.

Loomis Sayles International Bond A (LSIAX) seeks high total return. At least 65% of the funds assets are utilized to purchase international bonds. It focuses on acquiring investment grade bonds and not more than 35% of its assets may be invested in junk bonds. The international bond mutual fund returned 20.22% in the last one year period.

The international bond mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.10% compared to a category average of 1.13%.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds/mutualfunds/