Salomon Bros. Emerging Market Fund: Healthy Yield+Track Record=Solid Investment

| About: Western Asset (ESD)

Where is the Yield? submits: Legg Mason just announced that they were renaming the Salomon Brothers Emerging Markets Debt Fund (NYSE:ESD). The new name will be "Western Asset Emerging Markets Debt Fund," and so this closed-end fund, once a part of the Citigroup family, will shed the name that connected it to its previous owner.

The fund itself looks like good value here. The portfolio includes a better-than-average quality mix of emerging market debt, out of which the governments of Brazil,Russia and Mexico each take up roughly one fifth of assets. According to the most recent S&P report effective average duration is just over 3 years and credit quality averages BB+, with over 52% of assets rated investment grade. Management fees amount to a reasonable 1%, and the current yield on share price is 6.87%. The fund achieves this figure without leverage.

The fund has a solid three-year track record, and even though it has changed ownership, it seems to have performed consistently since the transfer. I also like the stated primary objective of Total Return, as opposed to current-income-at-all-cost.

Finally, there is the small matter of the 15.28% discount to NAV, at which the fund closed last Friday. The fund historically has gone down only as far as -15.80% to NAV, and while I don't expect the discount to just close miraculously within weeks, I certainly think share price at this point is more likely to move towards NAV than away from it.

The downside of owning this CEF is that the yield is not phenomenal compared with some of the other CEFs, and that emerging market debt as an asset class might suffer from a global slowdown, which may result in a "flight to safety." But I think the discount, the absence of leverage and the relatively good credit quality of the fund mean that the upside outweighs these issues, even when you add to them a healthy skepticism of new management.

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