We have seen some small nibbling in Emerging Market Bond funds, evident via the third largest offering in the category, EMLC (Market Vectors Emerging Markets Local Currency Bond, Expense Ratio 0.47%) pulling in more than $138 million in new assets via creation in the trailing one month period.
This account for approximately 10% of the fund’s asset base, and we should also watch two larger funds in the space, EMB (iShares J.P. Morgan USD Emerging Markets Bond, Expense Ratio 0.60%) and PCY (PowerShares Emerging Markets Sovereign Debt Portfolio, Expense Ratio 0.50%) which have $5 billion and $2.5 billion in AUM respectively.
EMB for example has pulled in north of $300 million in the trailing one month period in terms of creation assets as well. With a yield of 5.39% currently in EMLC’s case, it is interesting to see investors once again embracing Emerging Markets Bonds, which typically is a reflection of “risk off” mentality.
In the case of EMLC we see top end holdings to countries such as Chile, South Africa, Mexico, Poland, Brazil, and the Philippines for example.
Similarly, in EMB we see exposure to Russia, Argentina, Poland, Uruguay, and so on. What is notably absent from these portfolios is exposure to China, which is the largest single country weighting in the MSCI Emerging Markets Index.