Exchange traded funds do not celebrate birthdays with cake,
presents or a party at Chuck E. Cheese, but making it to the
five-year mark is significant. Making it that far as a successful
ETF is even more impressive, particularly when considering
the number of ETF closures will set a record this
So it is noteworthy that the PowerShares Emerging Markets
Sovereign Debt Portfolio (NYSE:
), the first ETF to offer investors dollar-denominated exposure
to the sovereign debt of developing nations, turned five today.
Even more noteworthy is the fact that the ETF did so with over
$2.7 billion in assets under management.
These days, PCY does battle with the larger iShares J.P.
Morgan USD Emerging Markets Bond Fund (NYSE:
) in what is one of the more compelling ETF rivalries out there.
Both ETFs now find themselves competing with a growing number of
non-dollar denominated emerging markets debt
, many of which have proven popular with investors.
Still, EMB and PCY have dominant market positions because the
funds offer investors the allure of emerging markets bonds with
the comfort and safety of the U.S. dollar. Of course, yield is
part of the equation. PCY has a trailing 12-month yield of almost
4.7 percent and a 30-day SEC yield of 4.2 percent. To boot, the
ETF pays a monthly dividend, which increases the allure of this
fund to income investors.
PCY's 64 holdings have an average years to maturity of almost
15.4 and an effective duration of 9.5 years. For those that
merely care about pure performance, PCY is celebrating its fifth
year of existence in style with a year-to-date gain of 13.8
percent that has the fund trading at all-time highs. Since
inception, PCY has gained 19.7 percent.
PCY hold issues from up to 22 countries at any given time and
current constituent nations include Turkey, Hungary, Lithuania,
Colombia, Brazil and Mexico. For what it is worth, some
investors are bullish on Brazilian and Mexican
debt. Additionally, Colombia's
credit rating could see further increases over
the next year
Reverting back to performance, PCY has some interesting
feathers in its cap. Acknowledging that these are not
apples-to-apples to comparison, the roster of major bond ETFs
that PCY has delivered more alpha than in the past year is
impressive. That lineup includes the following: The Vanguard
Total Bond Market ETF (NYSE:
), the iShares iBoxx $ Investment Grade Corporate Bond Fund
) and the SPDR Barclays Capital High Yield Bond ETF (NYSE:
In the past six months, PCY is up 11 percent compared to a
gain of 6.4 percent for the PIMCO Total Return Bond ETF (NYSE:
). Again, PCY is obviously different than funds such as BND or
JNK, but it has also distinguished itself in terms of
performance. With a low correlation to U.S. equities and
something to offer both aggressive and conservative investors,
PCY's status as one of the premier ETFs focusing on non-U.S.
bonds should be good for at least another five years.
For more on bond ETFs, click
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