The Vanguard Emerging Markets Government Bond ETF (NasdaqGS: VWOB) is up nearly 1% this month, arguably impressive considering the ETF’s 13.7% weight to Russia and combined 3.4% allocation to Hungary and Ukraine. The average duration on VWOB’s 543 holdings is 6.2 years with a yield to maturity of 5.3%. VWOB was one of the most successful ETFs launched in 2013, racing to almost $200 million assets under management as of the end of January. [These New ETFs Have Grown up Fast]
The Powershares Global Short Term High Yield Bond Portfolio (NYSEArca: PGHY) is off 0.4% this month, in part due to a combined 13.2% weight to Russia and Ukraine. However, that is well below the 21.4% the two countries combined for in the ETF in September 2013. [A Short Duration, High Yield Global Bond ETF]
As its name implies, PGHY is a high yield ETF with over 80% of its portfolio rated BB, B or CCC by S&P as of the end of 2013, according to PowerShares data.
PGHY’s low effective duration of 1.59 years helps the fund cope in a rising rate environment. Duration is a measure of a fund’s sensitivity to interest rate changes, and high durations will have a greater negative impact on an ETF’s performance as interest rates rise.