Under The Hood: iShares J.P. Morgan USD Emerging Markets Bond ETF

An emerging market fund is a mutual fund or ETF that invests the majority of its assets in stocks or bonds of developing countries. There are dozens of countries that qualify as emerging markets, but many common emerging market fund holdings are companies located in countries like Brazil, Russia, India, China, and Taiwan.

Investors are increasingly emphasizing seeking emerging markets as a place to allocate capital in 2019, but few offer debt holdings, which makes ETFs like the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) an attractive option. The fund provides this core EM exposure at a modest 0.39 percent expense ratio.

Emerging-market stocks have bounced back in 2019. After dropping more than 14% in 2018, the MSCI Emerging Markets Index was up 12.2% through the end of April. And then after falling more than 4% in early May, many investors are trying to determine whether the upward trend will resume. For those interested in an ETF that targets the solid growth the emerging markets have shown over the past two decades, but has a portfolio of debt holdings, EMB might be a good place to look.

EMB seeks to track the investment results of the J.P. Morgan EMBI® Global Core Index composed of U.S. dollar-denominated, emerging market bonds. The fund generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index. The index is a broad, diverse U.S. dollar-denominated emerging markets debt benchmark that tracks the total return of actively traded external debt instruments in emerging market countries.

The ETF offers exposure to U.S. dollar-denominated government bonds issued by emerging market countries. The fund provides access to the sovereign debt of 30+ emerging market countries in a single fund. Investors can use the iShares J.P. Morgan USD Emerging Markets Bond ETF to seek higher yield and customize your emerging markets allocation.

“The Fed has sent a clear signal that we are going to have more stable rates and they don’t seem to have their foot on the gas today as far as hiking rates, and that’s really good for emerging markets, especially for their local currencies, Tom Lydon explained in a recent “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.

For more podcast episodes featuring Tom Lydon, visit our podcasts category.