More importantly, credit risk is not a significant issue with ALD as 42% of the fund’s holdings are rated AA or AAA. That is right. ALD has AAA debt because it is not a pure emerging markets play and as such, it holds bonds issued in Australian, Hong Kong and Singaporean dollars, all AAA-rated nations. All 12 countries represented in the ETF have investment grade ratings. [Another Investment-Grade Bounce for the Philippines]
ALD’s effective duration is also favorable at just 3.1 years. By comparison, the largest dollar-denominated emerging markets bond ETF has an effective duration of 7.1 years.
“The upshot is that we are likely to see far stronger flows into EM bonds over the next few years, which will further boost the ability of emerging market economies to build out their economies and infrastructure, making the bonds still more attractive,” according to economy watch.
WisdomTree Asia Local Debt Fund