Rosenbluth also profiled some of the largest ETFs for emerging market bonds:
- iShares Emerging Markets Corporate Bond Fund (NYSEArca: CEMB) seeks to track the price performance of bonds in the Morningstar Emerging Markets Corporate Bond Index. It has $39.6 million in assets, its largest GICS sector exposure is to Financials (24% of assets) and its largest country exposure is to Brazil (14% of assets). CEMB has an average duration of 5.76 years and nearly half of the assets are in bonds with BBB credit ratings and 20% with BB or lower ratings from rating agencies that operate independently from S&P Capital IQ. CEMB also receives an underweight ranking for its Risk Considerations and its Cost Factors. Its expense ratio, at 0.60%, is quite high for a
fixed income ETF, but in line with others, according to S&P. - Market Vectors Emerging Markets Local Currency ETF (NYSEArca: EMLC) seeks to track bonds in the JPMorgan Government Bond Index – Emerging Markets Core issued in local currencies. It has $1.3 billion in assets and its largest country exposure is to Poland (10%). EMLC has an average duration of 4.94 years. EMLC’s credit quality is stronger than CEMB’s, with 30% in bonds rated A and just 11% in bonds rated below B based on S&P Capital IQ data. Some of the advantages of investing in local currencies are that yields that are less volatile and that are higher than equivalent U.S. dollar bonds. EMLC’s S&P Capital IQ technical indicator is negative (bearish). The expense ratio is 0.47%, Rosenbluth said. [Emerging Market Bond ETFs For Yield]
- iShares Emerging Markets High Yield Bond ETF (NYSEArca: EMHY) seeks to track the performance of the Morningstar Emerging Markets High Yield Bond Index, which is made up of all U.S.-dollar denominated bonds. EMHY has nearly $230 million in assets and its largest country weight is Turkey at 16.9%. EMHY has an average duration of 6.08 years. It has a riskier credit profile, with 80% of assets rated BB or below and just 19% rated BBB or above. EMHY is quite expensive at 0.65%, S&P notes.
- iShares Emerging Markets USD Bond ETF (NYSEArca: EMB) tracks bonds in the JPMorgan EMBI Global Core Index, which contains bonds denominated in U.S. dollars. EMB has $5 billion in assets, and its largest country weight is Russia with 6.71%. EMB’s average duration is 7.67 years. EMB has 49% of assets rated BBB, while 36% of assets have a rating of BB or lower. EMB’s expense ratio is 0.60%.
iShares Emerging Markets USD Bond ETF
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own EMB.