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Due to the hyperinflation scenario in Venezuela, emerging markets bond funds that hold local currency issues, including the iShares Emerging Markets Local Currency Bond ETF (NYSEArca: LEMB) and the VanEck Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC), which tracks the J.P. Morgan GBI-EM Global Core Index, feature little or no exposure to bolivar-denominated bonds.
“The Venezuelan debt situation is a good reminder for investors how important it is to understand the inner workings of indexes tracked by ETFs,” said Morningstar. “In the process of digging in, investors will recognize that most emerging-markets debt ETFs’ Venezuelan exposure comprises less than 3 percent of their portfolio.”
Emerging markets bond funds denominated in local currencies have been popular with yield-starved investors this as the U.S. dollar has been in a funk for most of this year. Year-to-date inflows to emerging markets bond funds have already set an annual record.
For more information on the fixed-income market, visit our bond ETFs category.