High-yield bonds, 33 percent of Eigen's portfolio at the end of October, returned 3.1 percent this year through Dec. 5, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index.
The managers of Pimco Unconstrained and Eaton Vance Global Macro said in their third-quarter reports that declines in some currencies, including the Mexican peso, hurt performance. The peso fell 16 percent against the U.S. dollar in the quarter, Bloomberg data show.
Michael Cirami, a co-manager of Eaton Vance Global Macro, said he is convinced his fund's holdings in emerging market bonds and currencies will pay off. Emerging market economies have better growth prospects and stronger finances than economies in the developed world, which are plagued by heavy debt burdens, he said.
"We view 2011 as a speed bump in a trend that will continue for a number of years," Cirami, 35, said in an interview in the firm's Boston's office.
Cirami, who joined Eaton Vance in 2003, has worked on the fund since 2008. The fund, down 0.1 percent this year, had 60 percent of its assets in foreign sovereign bonds and 8.2 percent in Treasuries at the end of the third quarter.
In retrospect, said Cirami, while it would have been nice to own more Treasuries, the risk-reward trade-off on the investment was unattractive.
"We like to have a position where we can lose a little and make a lot," he said. "Treasuries were the exact opposite of that trade."
Forecasters surveyed by Bloomberg expect the yield on the 10-year Treasury note to reach 2.73 percent in the fourth quarter of 2012, up from 2.08 percent as of Dec. 6.
Eigen favors junk bonds because their yields imply too gloomy a view of the economy and potential default rates. Using the same logic, he is selling protection on distressed companies, betting that the market is overly fearful of defaults over the next 18 months.
"Our economy is healing, not getting worse," he said.