ProShares is best known as an ETF provider of leveraged and
inverse funds and it is one of the main players in this market.
However, the company has also made a big push into the unleveraged
'regular' ETF market as of late, launching a series of funds in
this corner of the fund world over the last few weeks.
These include a global listed private equity fund,
, a dividend aristocrat ETFs,
, and lately more bond ETFs too. This bond space has been the
newest focus from the company, and it appears as if the
international market is its top target in this asset class (read
The Guide to International Treasury Bond ETF
Here, ProShares is zeroing in on the emerging market bond world in
its latest fund launch. This newest fund, the
Short Term USD Emerging Markets Bond ETF-EMSH
, looks to give investors broad exposure to this often-overlooked
bond type, and we have highlighted some of the key details
regarding this fresh product below:
EMSH in Focus
The new fund looks to track the DBIQ Short Duration Emerging Market
Bond Index and charge investors 50 basis points a year in fees
after waivers. The benchmark includes only USD-denominated debt
that has less than five years remaining to maturity.
The focus of the fund is on bonds issued by emerging market
sovereign governments, non-sovereign government agencies, and
corporations with significant government ownership. Currently, this
includes just under 20 nations from around the globe, including
countries in South America, Southeast Asia, the Middle East, and
Eastern Europe just to name a few (see
all the Emerging Market Bond ETFs here
In terms of exposure, the Ukraine, Brazil, and Russia each take up
about 10% of assets, while Turkey and Indonesia round out the rest
of the top five and each make up more than 9% of assets too. In
total, Europe makes up about 40% of assets, while Latin America
comes in second from a regional look at 33%.
Assets are also skewed towards federal debt at about 60% of the
total, though corporate debt makes up a surprisingly large 40% of
the total. The breakdown between investment grade and high yield is
evenly split too, while it is once again worthwhile to note that
all debt is denominated in American dollars so there is no currency
risk for U.S. investors in this product.
How does it fit in a portfolio?
This fund, thanks to its focus on short-term debt, could be a
better choice for investors seeking low levels of interest rate
risk. Additionally, since it is zeroing in on dollar-denominated
bonds, there is no worry if the foreign currencies tumble against
the dollar (see
Top Two Emerging Market USD Bond ETFs Head-to-head
The fund might not be appropriate for traders though, as volume and
assets look to be quite light in the beginning. Additionally, it
looks to have little in terms of yield as the product is focusing
on the safest combination of emerging market debt (dollar
denominated and short-term), though the presence of high yield
securities may help to boost this a bit.
Competition and Bottom Line
There are only a handful of bond ETFs that are focused on the
emerging market space available at this time. Among the most
popular is the
iShares JP Morgan USD Emerging Markets Bond ETF (
This product charges investors 60 basis points a year in fees,
while it has over $3.6 billion in assets under management. However,
the fund does have a significant component in long term holdings,
while it has the majority of its assets in intermediate term debt
Vanguard Launches New International Bond ETFs
Many other emerging market bonds ETFs either have similar profiles
or a focus on local currency debt (some have both). Given this,
there might be some room for EMSH to make a name for itself, though
it will certainly be a tough battle.
After all, the emerging market bond ETF world is pretty small and
investor interest-save for a few products-has been pretty light.
Still, if interest rates start to creep up and should foreign
currencies suffer against the greenback, this product might find a
decent sized following among those who want to stay in the emerging
market bond ETF space with lower levels of risk.
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ISHARS-JPM EM B (EMB): ETF Research Reports
PRO-ST USD EMB (EMSH): ETF Research Reports
PRO-SP5 ARISTOC (NOBL): ETF Research Reports
PRO-GLBL LPE (PEX): ETF Research Reports
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