Looking Into Emerging Markets Bonds ETFs

When comparing global central bank monetary policies, most developed countries have heavily relied on quantitative easing and low interest rates to bolster their economies, with some, notably the U.S. and the United Kingdom, already eyeing tighter monetary policies to obviate a potentially overheating economy. Meanwhile, many emerging market central banks have more room to run with their easing policies, which may continue to support their local debt securities.

EMB is a cap-weighted fund while PCY uses an equal-weight methodology.

“As of the end of 2017, EMB and PCY had trailing five-year annualized returns of 3.60% and 3.69%, respectively,” said Morningstar. “These numbers put both of them squarely in the middle of their category. Their Sharpe ratios for the same period were on par with the category average. Given their middling absolute and risk-adjust­ed performance, we have assigned both funds Neutral Performance Pillar ratings as of our most recent review.”

EMB charges 0.4% per year while PCY charges 0.5%, but both are among the least expensive emerging markets bond funds on the market.

For more information on the developing economies, visit our emerging markets category.