For example, PCY features sovereign debt issued by Ukraine, Venezuela, Latvia, Lithuania, Pakistan (a frontier market) and Romania. Those countries combine for 22.6% of PCY’s weight. By comparison, Romania, Lithuania, Venezuela and Ukraine combine less than 9% of EMB’s weight. PCY has the higher duration of the two ETFs at 8.48 years compared to 7.33 years on EMB.
PCY’s “strategy appears to be working. For instance, over the trailing five years through April 2015, the fund ranked in the top 5% of all open-end funds. That said, the fund’s U.S.-dollar emphasis and its avoidance of hard-hit emerging-markets corporate debt have been in market favor during most of that stretch–should local-currency or corporate emerging-markets debt return to market favor, the fund’s absolute and relative performance may suffer. The fund has also exhibited greater return standard deviation than market-cap-weighted emerging-markets sovereign-bond indexes,” according to Morningstar.
PCY does have some exposure to non-investment grade debt, but 35% of the ETF’s 81 holdings are rated BBB by S&P while a combined 22% are rated AA or A. The fund’s 30-day SEC yield is 5.93%.
PowerShares Emerging Markets Sovereign Debt Portfolio
