ETF Spotlight on iShares JPMorgan USD Emerging Markets Bond (NYSEArca: EMB), part of an ongoing series.
Assets: $3.3 billion.
Objective: The iShares JPMorgan USD Emerging Markets Bond Fund tries to reflect the performance of the JPMorgan EMBI Global Core Index, which is a broad, diverse U.S. dollar denominated emerging markets debt benchmark that follows debt instruments in emerging market countries.
Holdings: The fund holds fixed and floating-rate instruments issued by sovereign and quasi-sovereign entities. Top bond holdings include: Republic of Philippines 4.37%, Federation of Russia 3.75% and Republic of Turkey 3.66%.
What You Should Know:
- BlackRock‘s (NYSE: BLK) iShares ETF brand is the fund issuer.
- EMB has an expense ratio of 0.60%.
- The fund has 100 holdings.
- Component holdings have on average a lower medium grade credit rating.
- The ETF has a 12-month yield of 4.99% as of Nov. 22. [ETF Spotlight: High-Yield Emerging Market Equities]
- Country allocations include: Brazil 8.09%, Mexico 7.96%, Russian Federation 7.74%, Philippines 6.85%, Indonesia 6.18%, Colombia 5.39%, Venezuela 4.42%, Peru 4.13%, Poland 3.64% and other 38.39%.
- The ETF is down 0.08% over the last month, down 1.62% over the past three months and up 4.69% year-to-date.
- “Emerging markets have increased political and economic risks, which make them more susceptible to default,” Timothy Strauts, Morningstar analyst, said. “For the increased credit risk, investors get higher relative yields. As with any fixed-income product, investors need to be mindful of the yield offered and how that compares with their expectations for inflation over the long run.”
- Since EMB holds U.S.-dollar denominated bonds, investors will not be subject to direct currency risk. Investors wary of risk due to currency exposure may opt to take this fund over a local currency emerging market bond ETF. [International Bond ETFs: Understanding Currency Risk]
The Latest News:
- EMB recently fellow below its 50- and 200-day exponential moving averages.
- Emerging markets have improved their financial stability over the years, after abandoning inflation targeting, diminishing external debt and reducing fiscal deficits, Strauts writes for Morningstar.
- The average debt-to-GDP ratio in the emerging markets is less than 50%, compared to the U.S.’s debt-to-GDP of close to 100%.
- Investors have been shunning riskier assets, like emerging market debt, in light of the ongoing Eurozone debt crisis.
iShares JPMorgan USD Emerging Markets Bond
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.