One of the more noteworthy themes in ETF Land this year has been
the rise of emerging markets bond funds. Scores of
new emerging markets bond ETFs
have come to market and previously existing funds have delivered
The following illustrates just how impressive select emerging
markets bond ETFs have been this year: In the past 90 days, the
PowerShares Emerging Markets Sovereign Debt ETF (NYSE:
) has outperformed the much ballyhooed PIMCO Total Return ETF
) by nearly 130 basis points.
In fact, PIMCO's Bill Gross recently said bond investors "should
favor quality and 'clean dirty shirt' sovereigns" such as
(U.S., Mexico and Brazil)
Buoyed by positive sentiment from
in addition to Gross, emerging markets bond funds have flourished
in number and performance this year.
Regarding some of the new kids on the block, funds offering
exposure to emerging markets have finally made it onto the scene,
led by the WisdomTree Emerging Markets Corporate Bond Fund (NASDAQ:
). EMCB debuted in March and has hauled in more than $61 million in
assets under management, making it one of the more successful new
ETFs of 2012.
Five weeks later, the iShares Emerging Markets Corporate Bond
Fund (BATS: CEMB) came along and that fund has been fair in terms
of attracting AUM with $10.2 million.
Those that think two emerging markets corporate bond ETFs is
enough should think again because EMCB and CEMB have a new rival in
the form of the SPDR BofA Merrill Lynch Emerging Markets Corporate
Bond ETF (NYSE: ).
Not even a month old, the ETF is showing it is a valid
competitor to EMCB and CEMB. In fact, the SPDR offering has already
raked in almost $15.3 million in AUM, putting it well ahead of its
iShares rival in that regard.
Granted, the data set is small, but since the SPDR BofA Merrill
Lynch Emerging Markets Corporate Bond ETF started trading, it has
outperformed the PIMCO Total Return ETF by 230 basis points and its
iShares counterpart by almost 170 basis points.
'Me too' ETFs, and the SPDR BofA Merrill Lynch Emerging Markets
Corporate Bond ETF is certainly one, often find tough sledding when
competing against entrenched rivals. Simply put, human nature
dictates that most investors are not apt to switch to a new ETF
over an older version unless the new fund really has something
special to offer.
In the case of EMCD, it has one significant point in its favor:
It charges 0.5 percent per year in fees. That is 10 basis points
cheaper than what EMCB and CEMB charge.
EMCD features 83 holdings, a small number relative to the 461
featured in the fund's index. The ETF has a 30-day SEC yield of
3.06 percent and the index's current yield is 5.55 percent,
according to data on the SPDR website.
More than 76 percent of EMCD's holdings are rated A or Baa and
approximately 87 percent have maturities ranging from two to 10
years. Issues from Brazil, Russia and Mexico comprise about 45
percent of the fund's country weight while bonds issued by the
United Arab Emirates, South Korea, Hong Kong, China, India and
Qatar make up the rest of the fund.
Bottom line: by total return and assets attracted, there is no
denying EMCD is off to a banner start. While not impossible, EMCD
usurping EMCB for the title of the largest emerging markets
corporate bond ETF is not probable in the near-term. However, EMCD
looks like it has already trumped its iShares rival for the number
For more on emerging markets bond ETFs, click .
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