Van Eck, the fund provider behind the Market Vectors ETFs, is
cutting the price tag on its Market Vectors Emerging Markets Local
Currency Bond ETF (NYSEArca:EMLC) by 4 percent, effective
EMLC's annual net expense ratio is now capped at 0.47 percent,
from 0.49 percent previously, making the cheapest emerging markets
bond ETF in the space even cheaper. The fund has gathered around
$800 million since it came to market in mid-July 2010.
EMLC's largest competitor, the $1.23 billion WisdomTree Emerging
Markets Local Debt Fund (NYSEArca:ELD), has an annual expense ratio
of 0.55 percent. The Van Eck fund also has a lower expense ratio
than the $62 million the iShares Emerging Markets Local Currency
Bond Fund (NYSEArca:LEMB), which costs 0.60 percent.
Local currency debt funds were all the rage when they first came
out-dovetailing well with a longer-term dollar-weakening trend that
only added to returns for U.S. investors. Coupled with the
attractiveness of rapidly growing emerging markets, they were an
"Low default rates among corporate bond issuers, investment
grade credit ratings among most sovereign issuers in EMLC's index
and generally higher yields currently than comparable developed
world issuers make a compelling case for investing in emerging
market bonds," Ed Lopez, Market Vectors' marketing director, said
in a press release.
That said, the emerging markets investing environment has grown
decidedly less attractive in the past year, particularly given the
slowdown in China. Moreover, the volatility in markets related
largely to the eurozone's ongoing debt crisis has brought the
dollar's role as a safe-haven currency back into sharp focus.
A quick look at our "Currency Impact Report," which is based on
comprehensive data from MSCI, makes the point all too clearly. Just
look at all the red ink in the past 12 months in particular. That
sea of red basically represents returns that are being taken off
the table for U.S. investors by currency crosses that are favoring
Van Eck also markets the Market Vectors Emerging Markets High
Yield Bond ETF (NYSEArca:HYEM). It was rolled out in May of this
year and has gathered $15.5 million, according to data compiled by
IndexUniverse. HYEM has a net expense ratio of 0.40 percent.
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