As advisors and investors are beginning to expand their fixed-income allocations and create layered levels of risk in an investment portfolio, Van Eck Global, the money manager behind the Market Vectors exchange traded fund line, on Wednesday launched a new emerging markets high yield bond fund to meet the growing demand for alternative fixed-income investments.
Market Vectors Emerging Markets High Yield Bond ETF (NYSEArca: HYEM) has an expense ratio of 0.4%.
According to a regulatory filing, HYEM will try to reflect the BofA Merrill Lynch High Yield U.S. Emerging Markets Liquid Corporate Plus Index, which is comprised of U.S. dollar denominated debt issued by non-sovereign emerging market issuers rated BB1 or lower.
As of April 2, the underlying index includes 261 securities of 162 issuers from Argentina, Azerbaijan, Barbados, Brazil, Chile, China, Colombia, Egypt, El Salvador, Hong Kong, India, Indonesia, Israel, Jamaica, Kazakhstan, Mexico, Nigeria, Oman, Peru, the Philippines, Poland, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Turkey, Ukraine, United Arab Emirates, Venezuela.
Additionally, the index has a heavy emphasis on the industrial sector, along with high weightings in the financial services and utilities sectors.
The ETF will follow a capitalization-weighted methodology. However, there is a maximum 10% country cap and 2% issuer cap.
Existing ETFs tracking the emerging market high-yield bond market tend to focus on sovereign debt, said Edward Lopez, marketing director at Market Vectors. HYEM focuses on U.S. dollar-denominated corporate debt, which accounts for over 10% of the global high-yield corporate bond market.
“Through this fund, investors now have a simple, transparent way to add targeted exposure to this segment of the high-yield market,” Lopez said in a press release.
Other emerging market bond ETFs launched this year include the iShares Emerging Markets High Yield Bond Fund (BATS: EMHY) and the WisdomTree Emerging Markets Corporate Bond Fund (NasdaqGM: EMCB). [High-Yield Bond Investors Have More ETF Options]
For more information on high-yield fixed-income assets, visit our high-yield bonds category.
Max Chen contributed to this article.