EMB and PCY have expense ratios of 0.6% and 0.5%, respectively.
“EMB owns only U.S.-dollar-denominated bonds, so there is no direct currency exposure. This eliminates a risk, but some investors would probably prefer to have the foreign currency risk, because it could increase returns if the U.S. dollar falls versus emerging-markets currencies,” says Morningstar’s Timothy Strauts in an analyst report on the ETF. “The fund only invests in U.S.-dollar-denominated bonds because it improves the liquidity of the portfolio. Foreign-denominated bonds in many cases trade very infrequently.”
Strauts notes that PCY equal-weights its portfolio so countries with higher debt levels do not get higher allocation in the fund, which should reduce risk over the long term.
iShares JP Morgan USD Emerging Markets Bond Fund
PowerShares DB US Dollar Index Bullish
Full disclosure: Tom Lydon’s clients own EMB.