When diversifying an investment portfolio with overseas allocations, people should not neglect their fixed-income portion. With exchange traded funds, investors can include emerging market debt exposure as well.
On the upcoming webcast, The New Worlds of Emerging Markets Bonds, Francis G. Rodilosso, senior investment officer and portfolio manager for Van Eck Global, Eric Fine, managing director and portfolio manager at Van Eck Global, and Ed Lopez, Marketing Director for Van Eck Global, explain how the maturing emerging bonds market can help diversify a fixed-income portfolio and potentially enhance portfolio returns.
Over the past two decades, the emerging market credit profile has significantly improved as many countries implement more healthy fiscal and monetary policies, which have pushed down their average debt to gross domestic product ratios compared to developed economies.
Moreover, more investors are taking a look at emerging market debt for their attractive yields. For instance, the Market Vectors Emerging Markets Aggregate Bond ETF (NYSEArca: EMAG) has a 4.51% 30-day SEC yield, Market Vectors Emerging Markets High Yield Bond ETF (NYSEArca: HYEM) has a 7.15% 30-day SEC yield and Market Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC) has a 4.16% 30-day SEC yield.
While the develop markets may be associated with risk, emerging countries also issue investment-grade quality debt. Looking at EMAG’s credit quality breakdown, 71.7% of the ETF’s portfolio is allocated toward investment-grade debt, along with 15.9% in speculative-grade debt and 12.4% in non-rated debt.
Additionally, investors can also gain targeted exposure to emerging market debt through U.S.-dollar denominated or local currency ETFs.