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Market Vectors has announced the launch of its newest exchange-traded fund, the Market Vectors Emerging Markets Aggregate Bond ETF (EMAG), completing the conversion announced in October of the Market Vectors LatAm Aggregate Bond ETF (BONO) into this new fund.
Listed on the NYSE Arca, the fund seeks to track, before fees and expenses, the price and yield performance of the Market Vectors EM Aggregate Bond Index, an index incorporating the four major categories of emerging markets bonds: US dollar and euro-denominated sovereigns; local currency sovereigns; US dollar and euro-denominated corporates; and local currency corporates.
The index is also diversified across credit qualities, with approximately 70% of the underlying constituents currently receiving investment-grade ratings, and across currencies, with approximately half of the index currently made up of bonds issued in US dollars or euros and the other half in local emerging markets currencies.
The index is also diverse from a geographic perspective and continues to include Latin American debt as an important component, as well as debt from Africa, Asia, Eastern Europe, and the Middle East. As of November 30, 2013, Mexico (with a weighting of 9.78 percent), Brazil (9.46 percent), Russia (9.30 percent), China (6.73 percent), and Poland (5.36 percent) represented the five largest country weightings in the index.
“We’re very excited to launch EMAG, which offers the most comprehensive exposure to emerging markets bonds currently available in the ETF space,” said Ed Lopez, Marketing Director with Market Vectors ETFs.
“Extrapolating on the type of exposure originally offered on a regional level through BONO makes sense as investors seek more broadly diversified vehicles. We believe investors will also be drawn to the fund’s currency diversification, which may help reduce volatility, as well as to its credit quality diversification, which may help reduce risk.”
Lopez noted that in recent years the economies of many emerging markets issuers have improved relative to their developed markets counterparts. As this has occurred, emerging markets issuers have become more creditworthy, experiencing upgrades while some developed markets have seen downgrades, and bond yields have compared favourably to those of comparable bonds from developed markets.
The fund has a net expense ratio of 0.49 percent. Shareholders in the Market Vectors LatAm Aggregate Bond ETF do not need to take any action, as their shares will automatically be converted into an equal amount of shares in the new fund.
Market Vectors is the seventh largest provider of exchange-traded products in the US and the tenth worldwide, with assets under management totalling $23.7 billion (as of October 31, 2013).