Best Emerging Market Debt ETFsInvesting in emerging markets can be done either through bond or stock. Choosing emerging markets bond provide less risk for investors than emerging markets stock. This EM bond also has higher yield than other taxable bond.
One of investment choice is using exchange traded fund or ETFs. Other alternatives include mutual fund, closed end fund, and individual stock / bond. Currently, there are about 14 ETFs in this emerging markets bond category. The fund sponsors include iShares, State Street, Invesco PowerShares, Guggenheim, Van Eck Global, WisdomTree, etc. The expense ratios are in the range of 0.39% and 0.60%.
Several advantages of emerging markets debt investment:
- This investment funds provide high yield income for investors
- Investors may get emerging markets currencies exposure such as Yuan (China), Singapore Dollar (SGD), Brazillian Reals, Mexican Peso, etc.
- PowerShares Emerging Markets Sovereign Debt (PCY)
- iShares JPMorgan USD Emerging Markets Bond (EMB)
- Market Vectors EM Local Currency Bond ETF (EMLC)
- WisdomTree Emerging Markets Local Debt (ELD)
- SPDR Barclays Capital EM Local Bond ETF (EBND)
- WisdomTree Asia Local Debt ETF (ALD)
1. PowerShares Emerging Markets Sovereign Debt (PCY)
PowerShares Emerging Markets Sovereign Debt fund aim is to achieve the investment results of the DB Emerging Market USD Liquid Balanced Index. It utilizes its assets to purchase emerging markets U.S. dollar-denominated government bonds. It has annual expense ratio of 0.50%. The current fund yield is 4.87%. The total net assets are $2.1 billion.
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Ranked with 4 star rating by Morningstar, this best bond ETF has returned 13.5% over the past year, and 12.38% over the past 3 year. It has its worst 1 year return in 2008 with -19.09%. The top 2 holdings include Romania Medium Term Nts Reg S 6.75%, and Islamic Rep Pakistan 6.875%.
2. iShares JPMorgan USD Emerging Markets Bond (EMB)
iShares JPMorgan USD Emerging Markets Bond fund invests majority of its assets in a diversified portfolio of U.S. dollar denominated emerging markets debts. It uses the JPMorgan EMBI Global Core Index as its benchmark. The dividend yield is 4.45%. This fund also has $5.2 billion of assets.
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This high yield bond ETF has a 3 year annualized return of 12.49%. The year to date return is 10.60%. This fund has an effective duration of 7.38 years.
3. Market Vectors EM Local Currency Bond ETF (EMLC)
Market Vectors Emerging Markets Local Currency Bond ETF is tracking the J.P. Morgan Government Bond index - Emerging Markets Global Core. This exchange traded fund invests mainly in emerging market governments bonds which are denominated in the local currency.
This emerging market debt fund has a low 0.47% expense ratio. The distribution yield is 4.73%. The fund inception date is July 21, 2010. The NAV price is $30.16 (as of August 31, 2012). The ETF share price is $30.24.
4. WisdomTree Emerging Markets Local Debt (ELD)
This WisdomTree Emerging Markets Local Debt fund uses its assets to purchase a portfolio of local emerging markets debts with duration of between of 2 and 8 years. The total net assets are $1.2 billion. This WisdomTree fund has medium credit quality and medium interest rate sensitivity.
This emerging markets bond fund has YTD return of 7.45%. As of August 2012, the top 4 sectors are government (65.87%), convertible (15.57%), supranational (6.77%) and corporate bond (3.90%). The top 3 holdings in its assets are Russian Federation 7.85%, Brazil Federative Rep 10.25%, and Chile Rep 5.5%.
5. SPDR Barclays Capital EM Local Bond ETF (EBND)
With $209 million of assets, the SPDR Barclays Capital Emerging Markets Local Bond ETF is seeking to track the Barclays Capital EM Local Currency Government Diversified Index. This fund market share price has a 52-week range of $28.32-$32.84. Its yield is 1.23% and its expense ratio is 0.50% per year.
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This emerging market bond fund has 1-year average return of -1.87%. The average credit quality is BB. The average maturity is 6.59 years.
6. WisdomTree Asia Local Debt ETF (ALD)
WisdomTree Asia Local Debt ETF is focusing its investment in local debt denominated in the currencies of Asia Pacific ex-Japan countries. The investment objective is to provide high total returns from income and capital appreciation. It may invest in South Korea, Malaysia, Indonesia, Philippines, Thailand, India, China, Hong Kong, Singapore, Australia, etc. The fund CUSIP is 97717X842.
This best emerging markets debt fund has a weighted average coupon of 4.73%. The average trading volume is 88,702 per day.
Note: If you have interested in emerging markets sector, you might want to check emerging markets stock ETFs. I’ll discuss further in my future article.
Disclosure: No Position
Fund Performance
| No | Name | Symbol | Rating | ER | Assets * | YTD |
|---|---|---|---|---|---|---|
| 1 | PowerShares Emerging Markets Sovereign Debt | PCY | 4 | 0.50% | $2,126,472 | 10.09% |
| 2 | iShares JPMorgan USD Emerging Markets Bond | EMB | 3 | 0.60% | $5,240,088 | 7.86% |
| 3 | Market Vectors EM Local Currency Bond ETF | EMLC | - | 0.49% | $762,120 | 6.90% |
| 4 | WisdomTree Emerging Markets Local Debt | ELD | - | 0.55% | $1,209,546 | 6.21% |
| 5 | SPDR Barclays Capital EM Local Bond ETF | EBND | - | 0.50% | $211,184 | 7.45% |
| 6 | WisdomTree Asia Local Debt ETF | ALD | - | 0.55% | $424,596 | 3.13% |
| 7 | WisdomTree Emerging Markets Corporate Bond | EMCB | - | 0.60% | $62,200 | n/a |
| 8 | iShares Emerging Markets Local Currency Bond | LEMB | - | 0.60% | $50,690 | 2.20% |
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