Market Vectors’ emerging markets local currency bond ETF celebrates third birthday

Aug 8th, 2013 | By | Category: Fixed Income

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The NYSE Arca-listed Market Vectors Emerging Markets Local Currency Bond ETF (EMLC), the first US-listed ETF to focus on local currency emerging markets bonds, has celebrated its third anniversary.

Market Vectors’ emerging markets local currency bond ETF celebrates third birthday

Fran Rodilosso, fixed income portfolio manager at Market Vectors.

Since its launch in late July 2010, the fund has proved popular with investors who have been attracted to the currency and credit fundamentals many emerging markets offer.

It currently has some $1.2 billion in assets under management, making it the second-largest ETF in this genre.

The fund seeks to replicate the performance of the JP Morgan GBI-EMG Core Index. As of June 30, 2013, this index tracked a selection of local currency bonds issued in 16 different local currencies, including those of Brazil, Chile, Colombia, Hungary, Indonesia, Malaysia, Mexico, Nigeria, Philippines, Poland, Peru, Romania, Russia, South Africa, Thailand and Turkey.

Fran Rodilosso, fixed income portfolio manager at Market Vectors, said: “We believe EM bonds are important in building a well-diversified fixed income investment portfolio. EM bonds and bond funds were among the most affected by the broad global sell-off that took place toward the end of the second quarter. We have recently seen some of these markets recover very quickly.”

He added: “I believe that many local currency-denominated EM bonds continue to deliver more attractive yields, even given the perceived risks, than traditional fixed income investments. Currency and credit fundamentals in many emerging markets also continue to compare very favourably versus developed markets.”

The fund, which currently has a net expense ratio of 0.47%, is one of eight ETFs amounting to $1.9 billion in assets co-managed by Rodilosso. It’s nearest rivals, in terms of US-listed local currency emerging market bond ETFs, include the WisdomTree Emerging Markets Local Debt ETF (ELD), the market leader with almost $1.6 billion, the iShares Emerging Markets Local Currency Bond ETF (LEMB) and the smaller SPDR Barclays Emerging Markets Local Bond ETF (EBND).

European investors looking for a locally listed equivalent have a number of options, these include the Pimco EM Advantage Local Bond Index Source ETF (EMLB) listed on the London Stock Exchange; the iShares Barclays Capital Emerging Market Local Govt Bond ETF (SEML) listed on the London Stock Exchange, Borsa Italiana, Deutsche Börse and SIX Swiss Exchange; and the SPDR Barclays Capital Emerging Markets Local Bond ETF (EMDL) listed on the London Stock Exchange, Borsa Italiana, Deutsche Börse, SIX Swiss Exchange and Euronext.

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