A few new exchange-traded offerings with exposure to emerging market bonds and international stocks have just occurred. These ETF funds are very different, including currency, short-side inverse funds and a growth ETF with an international focus. Let’s analyze them.
New Emerging Markets Bond ETF
First up is the Market Vectors Emerging Markets Local Currency Bond Exchange-Traded Fund (NYSE: EMLC). Van Eck Global expanded its ETF lineup by offering a new emerging markets bond ETF linked to the J.P. Morgan Government Bond Index-Emerging Markets Global Core Index. This benchmark currently has 171 holdings with maturities ranging from one to 30 years. The average yield-to-maturity is 6.8% as of July 1, 2010.
The index currently tracks a selection of bonds issued in local currencies by thirteen emerging market countries representing Latin America, Eastern Europe, Africa, and Asia: Brazil, Colombia, Egypt, Hungary, Indonesia, Malaysia, Mexico, Peru, Poland, Russia, South Africa, Thailand, and Turkey. The index is market-cap weighted, with individual country exposures capped at 10% to provide more diversification among countries within the index. The fund’s net annual expense ratio is 0.49%.
EMLC is the first US-listed ETF designed to offer investors exposure to bonds issued in local currencies by emerging market governments. Van Eck has long been a proponent of emerging markets investing and, as you’ll see in the press release, points to the potential for currency appreciation and higher yields in EM countries, relative to their developed counterparts, as part of their thinking behind launching EMLC.
New Inverse ETF
Next up is the Barclays ETN+ Inverse S&P 500 VIX Short Term Futures ETN (NYSE: XXV). Barclays Capital debuted an exchange-traded note or ETN that provides opposite or inverse exposure to stock market volatility. ETNs are typically linked to the performance of a currency or an index. Like bonds, ETNs carry credit default risk of the financial institution issuing them.
“Investors are increasingly looking for diversified ways to access equity market volatility,” said Philippe El-Asmar, Head of Investor Solutions at Barclays Capital. “We are pleased to provide them with the first exchange traded product that allows them to express a bearish view on volatility.” The annual fees on XXV are 0.89%.
New ADR Growth ETF
Last is the WCM/BNY Mellon Focused Growth ADR ETF (NYSE: AADR). AdvisorShares launched an actively managed international ETF which is sub-advised by institutional money manager WCM Investment Management (WCM.)
The investment objective of AADR is long-term capital appreciation above international benchmarks such as the BNY Mellon Classic ADR Index and the MSCI EAFE Index. AADR will own a large-cap growth portfolio for the non-U.S. universe. The portfolio, which includes developed and emerging markets, is purposely very different from international benchmarks and other international funds. WCM is concentrated on 20-30 holdings and emphasizes traditional growth sectors such as technology, healthcare and consumer staples/discretionary. AADR’s annual expense ratio is 1.25%.
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