ETF Spotlight on the ProShares Short Term USD Emerging Markets Bond ETF (BATS: EMSH), part of an ongoing series.

Assets: $12.0 million

Objective: The ProShares Short Term USD Emerging Markets Bond fund tries to reflect the performance of the DBIQ Short Duration Emerging Market Bond Index, which includes long positions in short term emerging market bonds, with an average maturity of three years or less.

Holdings: Top holdings include Qatar, Turkey, Croatia, Ukraine and Mexico bonds.

What You Should Know:

  • ProShares sponsors the ETF.
  • EMSH has a 0.50% expense ratio.
  • The ETF has 66 bond components and the top ten holdings make up 22.9% of the overall portfolio.
  • Country allocations include Ukraine 11.1%, Indonesia 9.9%, Russia 9.6%, Turkey 9.4%, Brazil 9.4%, Venezuela 9.0%, Mexico 8.9%, Qatar 7.2%, South Africa 3.7% and Colombia.
  • Fixed-income allocations include 46.5%  government, 5.0% agency and 34.5% corporate bonds.
  • Credit quality includes A- 4%, BBB 38%, BB 16%, B 10% and Not Rated 24% – rated BBB and above is considered investment grade.
  • The fund has a modified duration of 2.17 years – duration is a measure of a bond fund’s sensitivity to rising interest rates.
  • EMSH comes with a 4.01% 30-day SEC yield.
  • The ETF started trading on November 19, 2013.
  • The fund is relatively flat since inception.
  • The short-term bond ETF provides a mores conservative play on emerging market debt as it helps limit interest rate risk abroad.
  • Rising rates have a negative effect on bond prices, but funds with a lower duration help limit the negative effects on higher interest rates.
  • EMSH also holds U.S. dollar-denominated emerging market bonds, which helps limit currency risk as emerging market currencies depreciate against the U.S. dollar, but the strategy could underperform if developing market currencies start strengthening.