Global High Income Fund Inc. – Fund Commentary and Portfolio Statistics

NEW YORK--()--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 first quarter 2014 from UBS Global Asset Management (Americas) Inc. (“UBS Global AM”), the Fund’s investment advisor

Market Review

After a challenging start, the emerging markets debt asset class rallied and generated solid results for the first quarter of 2014 as a whole. Risk aversion was elevated at times in January against a backdrop of concerns regarding global growth. This was partially triggered by weak economic data in China. In addition, a number of emerging market currencies sold off during the month. While there was no one catalyst, the asset class then rallied sharply in February. Given spread1 widening in 2013 and January 2014, emerging market debt valuations were more attractive and investors may have felt that negative economic and geopolitical news had been largely priced into the market. Despite a number of headline risks, including Russia's actions in Ukraine, the asset class continued to move higher in March. US dollar-denominated debt, as measured by the JP Morgan Emerging Markets Bond Index Global (EMBI Global), posted a 3.48% return over the three months, whereas local currency emerging markets debt, as measured by the JP Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM Global Diversified), posted a 1.90% return during the same time period.

Performance review

For the first quarter of 2014, the Fund posted a net asset value total return of 1.59%, and a market price total return of 1.52%. On a net asset value basis, the Fund underperformed its benchmark, the Global High Income Fund Index (the “Index”)2, which returned 2.71% for the quarter.

While the Fund posted a positive return over the first three months of the year, it was not able to keep up with the Index's strong return. The Fund's underweight to Argentinian US dollar-denominated debt was the greatest detractor from relative performance. Given our concerns regarding the fundamentals and political backdrop in Argentina, we moved from an overweight to an underweight position in late 2013 and early 2014 which was not rewarded, as the country performed well during February and March. In addition, a small overweight position in Russian debt and the Russian ruble detracted from results, as investment sentiment weakened on Russia's actions in Ukraine. While we generally continue to have a favorable view of the country, we reduced the Fund's exposure to Russian debt and currency to neutral relative to the Index. An underweight in Ukraine was also a modest detractor from performance as the country rallied after the International Monetary Fund pledged to support its economy. Elsewhere, having an underweight in local Indonesian debt was not beneficial for results. Despite the country's high current account deficit, Indonesia outperformed the Index during the quarter, supported by promising measures to trim the deficit.

On the upside, the Fund's overweight positions in a number of higher yielding countries, including US dollar-denominated debt from Venezuela, Belarus and Sri Lanka, enhanced results. In each case their spreads narrowed during the quarter. The Fund's allocation to longer-term Brazilian local debt was also a positive for results. Finally, while the Fund maintained an underweight interest rate and currency exposure to hard currency (e.g., US dollar, euro) emerging markets debt, its overweight in spread risk terms added to performance.


We maintain a cautious near-term outlook for the emerging markets asset class. Improving growth in developing countries could have a positive impact on emerging market exports. However, this has yet to occur. While certain geopolitical issues have been priced into the market, in our view, we expect to see continued periods of elevated volatility. That being said, the potential impact of higher rates in the US could be somewhat more muted in 2014 versus last year, as the Federal Reserve has indicated it will continue to taper its asset purchases. Within the asset class, we feel US dollar-denominated debt should outperform local debt for the year as a whole.

Portfolio statistics as of March 31, 20143


Top ten countries (bond holdings only)4

  Percentage of net assets
Brazil   12.4%
Turkey   7.9
Russia   6.7
Indonesia   5.9
Venezuela   5.0
Mexico   4.7
Malaysia   4.4
India   4.1
Poland   4.0
South Africa   3.9
Total   59.0
Top ten currency exposures (includes all securities and other instruments)  

Percentage of net assets

United States Dollar   52.6%
Brazilian Real   9.1
Polish Zloty   4.0
Russian Ruble   3.5
Turkish Lira   3.2
South African Rand   2.9
Thai Baht   2.9
Euro   2.9
Malaysian Ringgit   2.7
Colombian Peso   2.2
Credit quality5   Percentage of net assets
AA   0.9%
A   11.9
BBB   28.1
BB   11.1
B   10.2
Non-rated   34.8
Cash and other assets, less liabilities   3.0
Total   100.0
Net asset value per share6   $11.35
Market price per share6   $9.87
NAV distribution rate (DR)6   7.04%

Market distribution rate (DR)6



  6.0 yrs
Weighted average maturity   8.4 yrs

1 "Spread" refers to the difference between the yields paid on US Treasury bonds and other types of debt, such as emerging markets bonds.
2 Global High Income Fund Index is an unmanaged index compiled by the advisor, currently constructed as follows: 50% JP Morgan Emerging Markets Bond Index (EMBI Global) and 50% JP Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM Global Diversified). Investors should note that indices do not reflect the deduction of fees and expenses.
3 The Fund’s portfolio is actively managed, and its portfolio composition will vary over time.
4 Excludes exposures obtained via derivatives (e.g., swaps).
5 Credit quality ratings shown in the table are based on those assigned by Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial, (“S&P”), to individual portfolio holdings. S&P is an independent ratings agency. Rating reflected represents S&P individual debt issue credit rating. While S&P may provide a credit rating for a bond issuer (e.g., a specific company or country); certain issues, such as some sovereign debt, may not be covered or rated and therefore are reflected as non-rated for the purposes of this table. Credit ratings range from AAA, being the highest, to D, being the lowest, based on S&P’s measures; ratings of BBB or higher are considered to be investment grade quality. Unrated securities do not necessarily indicate low quality. Further information regarding S&P’s rating methodology may be found on its website at Please note that any references to credit quality made in the commentary preceding the table may reflect ratings based on multiple providers (not just S&P) and thus may not align with the data represented in this table.
6 Net asset value (NAV), market price and distribution rates will fluctuate. NAV distribution rate
(DR) is calculated by multiplying the current month’s distribution by 12 and dividing by the month-end net asset value. Market distribution rate (DR) is calculated by multiplying the current month’s distribution by 12 and dividing by the month-end market price.
7 Duration is a measure of price sensitivity of a fixed income investment or portfolio (expressed as % change in price) to a 1 percentage point (i.e., 100 basis points) change in interest rates, accounting for optionality in bonds such as prepayment risk and call/put features.

Any performance information reflects the deduction of the Fund’s fees and expenses, as indicated in its shareholder reports, such as investment advisory and administration fees, custody fees, exchange listing fees, etc. It does not reflect any transaction charges that a shareholder may incur when (s)he buys or sells shares (e.g., a shareholder’s brokerage commissions).

Disclaimers Regarding Fund Commentary - The Fund Commentary is intended to assist shareholders in understanding how the Fund performed during the period noted. The views and opinions were current as of the date of this press release. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the Fund and UBS Global AM reserve the right to change views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund’s future investment intent.

Past performance does not predict future performance. The return and value of an investment will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Any Fund net asset value ("NAV") returns cited in a Fund Commentary assume, for illustration only, that dividends and other distributions, if any, were reinvested at the NAV on the payable dates. Any Fund market price returns cited in a Fund Commentary assume that all dividends and other distributions, if any, were reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Returns for periods of less than one year have not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends and other distributions, if any, or on the sale of Fund shares.

Investing in the Fund entails specific risks, such as interest rate risk and the risks associated with investing in the securities of issuers in emerging market countries. The value of the Fund's investments in foreign securities may fall due to adverse political, social and economic developments abroad and due to decreases in foreign currency values relative to the US dollar. Investments in emerging market issuers may decline in value because of unfavorable government actions, greater risks of political instability or the absence of accurate information about emerging market issuers. Further detailed information regarding the Fund, including a discussion of principal objectives, principal investment strategies and principal risks, may be found in the fund overview located at You may also request copies of the fund overview by calling the Closed-End Funds Desk at 888-793 8637.

©UBS 2014. All rights reserved.
The key symbol and UBS are among the registered and unregistered trademarks of UBS.


UBS Global Asset Management
Closed-End Funds Desk: 888-793 8637


UBS Global Asset Management
Closed-End Funds Desk: 888-793 8637