Add the iShares Emerging Markets Local Currency Bond Fund
) to the list of emerging markets bond
that are home to robust inflows this year. LEMB, which is just 13
months old, had
about $207 million in assets under management
as of October 29.
That number now rests at $363.2 million after what has been a
spectacular week of inflows. In just over a week, LEMB has raked
in $150 million in fresh investments, according to a research
note published today by Street One Financial.
LEMB, which has returned three percent since its debut and
nearly five percent in 2012, is not going to win any volume
contests. With average daily turnover of just over 28,300 shares,
LEMB fits the bill as a new ETF that some money managers would
avoid based solely on the lack of volume. However, the inflows
and LEMB's decent yield indicate otherwise.
"Yielding 3.74% (30 day SEC Yield) at the moment, this fact is
also likely a draw to institutional managers whom are looking for
'risk on; type exposure in sovereign bonds via an ETF," said Paul
Weisbruch, Street One Financial vice president of ETF and options
sales and trading, in the note.
LEMB is home to 65 holdings with an effective duration of 4.17
years and a weighted average maturity of 6.19 years. On the
Moody's Investors Service ratings scale, 18.4 percent of LEMB's
holdings are not rated, but only 11 percent of the fund's rated
holdings reside in junk territory. The bulk of LEMB's holdings
are rated Aa3 or Baa1 by Moody's.
LEMB's top country weights are South Korea and Brazil.
Sovereign bonds issued by those nations account for over a third
of the fund's weight. Other countries represented in the ETF
include Mexico, Poland, Turkey, Thailand and Malaysia.
Surging inflows to LEMB are indicative of a prominent trend in
2012. Amid anemic interest rates in the U.S., declining credit
quality for some European sovereign issuers and improving credit
quality in the developing world, investors are increasingly
turning to emerging markets bond ETFs for diminished credit risk
and higher yields. As highlighted by LEMB, that theme has not
been limited to the dollar-denominated ETFs.
In early May, the Market Vectors Emerging Markets Local
Currency Bond ETF (NYSE:
) had $743 million in AUM. That number was over $1.1 billion at
the start of trading on November 21. The WisdomTree Emerging
Markets Local Debt Fund (NYSE:
), the first actively managed ETF to eclipse $1 billion in
assets, has added nearly 25 percent to its AUM total this year.
The WisdomTree Asia Local Debt Fund (NYSE:
), another actively managed product, has nearly $439 million in
assets and that fund has been trading for less than two
For more on emerging markets bond ETFs, click
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