VanEck Vectors EM local currency bond ETF launched on Xetra

Apr 28th, 2017 | By | Category: Fixed Income

VanEck has rolled out the VanEck Vectors JP Morgan EM Local Currency Bond UCITS ETF on Deutsche Börse’s Xetra and Frankfurt exchanges (Ticker: G2X1).

VanEck Vectors EM local currency bond ETF launched on Xetra

The VanEck Vectors JP Morgan EM Local Currency Bond UCITS ETF offers investors access to high yields with the possibility to benefit from currency appreciation.

The cross-listing follows shortly after the fund’s initial launch on the London Stock Exchange (Ticker: EMLC) last week.

The fund tracks the JP Morgan GBI-EMG Core Index, a reference for the performance of bonds issued in local currencies by 16 emerging market governments: Argentina, Brazil, Chile, Colombia, Hungary, Indonesia, Malaysia, Mexico, Peru, Philippines, Poland, Romania, Russia, Thailand, Turkey, and South Africa. The fund trades in US dollars.

The index is market-cap weighted and rebalanced monthly, with individual country exposure capped at 10% to enhance diversification. A country floor of 3% is also applied.

There are over 200 holdings in the index; the ETF itself holds 80 securities as it pursues a sampled replication approach to index tracking. Bonds from Brazil, Poland, Indonesia and Mexico each make up approximately the maximum allowable weighting of 10% in the ETF, while South Africa (9.1%), Turkey (7.0%) and Colombia (6.6%) make up the next largest country exposures.

Investors may be surprised to learn that the majority of the ETF’s holdings are of investment grade quality (58.2%), composed primarily of bonds rated ‘A’ (20.2%) and ‘BBB’ (37.7%). Bonds rated ‘BB’ make up 14.0% while a portion of unrated bonds accounts for 24.8%.

The ETF may suit investors seeking higher income opportunities as the index’s current yield to maturity is 6.4%. The index’s effective duration is 5.0 years and is up 6.4% year to date. (All data as of 28 April 2017).

Shortly after launch, VanEck lowered the total expense ratio for the fund from 0.47% to 0.44%.

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