Emerging market debt is a growing component of global bond markets and investors are increasingly leveraging passive investments to access the asset class. However, challenges still exist when investing in EM debt.
On the upcoming webcast, Beyond Factor Fundamentals – Are You Factoring in EM Debt?, David M. Lebovitz, Global Market Strategist for J.P. Morgan Asset Management, Eric Isenberg, Head of Fixed Income Portfolio Management at J.P. Morgan Asset Management, and Ryan Szakacs, Vice President of ETF Capital Markets for J.P. Morgan Asset Management, will explore factor investing in bond markets and how an allocation to EM can potentially boost yield and increase diversification, without a meaningful increase in duration.
For example, the recently launched JPMorgan USD Emerging Markets Sovereign Bond ETF (NYSEArcaL: JPMB) shows a 4.93% 30-day SEC yield and an average duration of 7.04 years.
The JPMorgan USD Emerging Markets Sovereign Bond ETF tries to reflect the performance of the JPMorgan Emerging Markets Risk-Aware Bond Index, which is comprised of U.S. dollar-denominated sovereign and quasi-sovereign fixed and floating rate debt securities from emerging market issuers selected by a rules-based methodology.
Related: J.P. Morgan Rolls Out a Smart Beta Emerging Market Bond ETF
The rules-based indexing methodology integrates factor-based screens to diminish risks many are wary of with emerging market exposure. The underlying index starts out by selecting securities taken from the J.P. Morgan Emerging Market Bond Index Global Diversified and applies a proprietary methodology to filter for liquidity, for country risk and allocates risk based on credit rating.
Through this alternative weighting approach, the index seeks to provide better risk-adjusted returns compared to traditional market cap-weighted indexing and to potentially generate a competitive yield with lower levels of duration for investors.
JPMB’s credit quality breakdown includes investment-grade AAA 0.%, A 7.4% and BBB 27.7%, along with speculative-grade BB 29.5%, B 32.4% and CCC or lower 2.3%.
Financial advisors who want to learning more about the EM debt market can register for the Tuesday, April 24 webcast here.