Market Vectors’ Fran Rodilosso: As the Emerging Market Sell-off Continues, Pockets of Value May Remain in EM Sovereign and Hard Currency Debt

Business Wire


After a year of largely negative returns, fixed income asset classes appear to already be facing significant headwinds in 2014. But according to Fran Rodilosso, fixed income portfolio manager with Market Vectors ETFs, some high yield-oriented asset classes, and selected emerging market (EM) debt in particular, may be getting unduly punished.

“Emerging markets are suffering from a variety of afflictions at the moment,” said Rodilosso. “The concern remains that Fed tapering may pull more investment dollars away from both emerging markets debt and equity. This has been compounded by negative news and/or economic data from Turkey, South Africa, Argentina, Ukraine and, most importantly, China.”

“The trend of capital flows away from emerging markets generally has a self-fulfilling, negative effect. Several of the countries being most impacted by the current sell-off are suffering political as well as economic stress,” he continued. “But we believe there is still a far more solid underpinning to most emerging economies, and to their government balance sheets, than there has been in previous periods of stress.”

In some cases, added Rodilosso, domestic capital markets in EM nations are more mature than they were in previous crises, and while emerging markets debt asset classes may see additional outflows in the coming months, the long-term trend of higher institutional allocations to various types of EM debt appears to be intact.

Rodilosso went on to note that EM high yield corporates1 (denominated in US dollars) ended 2013 with a spread of more than 200 bps versus U.S. high yield corporates2, some 175 bps wider than where they were at the start of the year. The spread in EM investment grade corporates3 was more than 60 bps at year-end, with EM investment grade corporates’ effective duration being more than 100 bps lower than U.S. investment grade corporates4, he added.

“EM debt has experienced a relative pick-up in spreads over the last nine months and I believe there are pockets of value still to be found around the globe. I have no doubt that timing will play a factor, but it is not too early to start looking,” Rodilosso said.

Mr. Rodilosso has 20 years of experience trading and managing risk in fixed income investment strategies, and currently oversees Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC®), Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM®), Investment Grade Floating Rate ETF (NYSE Arca: FLTR®), International High Yield Bond ETF (NYSE Arca: IHY®), Emerging Markets Aggregate Bond ETF (NYSE Arca: EMAGTM), Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL®), Treasury-Hedged High Yield Bond ETF (NYSE Arca: THHY), and Renminbi Bond ETF (NYSE Arca: CHLC®). As of December 31, 2013 the total assets for these ETFs amounted to approximately $1.4 billion.

Indices are not securities in which investments can be made.

1 BofA Merrill Lynch High Yield US Emerging Markets Liquid Corporate Plus Index: below investment grade U.S. dollar denominated emerging markets non-sovereign debt

2 BofA Merrill Lynch US High Yield Index: below investment grade US dollar denominated corporate debt publicly issued in the US domestic market

3 BofA Merrill Lynch High Grade US Emerging Markets Liquid Corporate Plus Index: investment grade U.S. dollar denominated emerging markets non-sovereign debt

4 BofA Merrill Lynch US Corporate Index: investment grade US dollar denominated corporate debt publicly issued in the US domestic market

Effective Duration measures a bond's sensitivity to interest rate changes that reflects the change in a bond's price given a change in yield. This duration measure is appropriate for bonds with embedded options.

About Market Vectors ETFs

Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family totaled $22.1 billion in assets under management, making it the seventh largest ETP family in the U.S. and 10th largest worldwide as of December 31, 2013.

Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes.

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. The Funds' underlying securities may be subject to call risk, which may result in the Funds having to reinvest the proceeds at lower interest rates, resulting in a decline in the Funds' income.

Principal International and Emerging Markets Risk Factors: Fixed income securities are subject to credit risk and interest rate risk. High yield bonds may be subject to greater risk of loss of income and principal and are likely to be more sensitive to adverse economic changes than higher rated securities. International investing involves additional risks which include greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity, and political instability. Changes in currency exchange rates may negatively impact the Fund’s return. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict, and social instability. Investors should be willing to accept a high degree of volatility and the potential of significant loss. Diversification does not assure a profit nor protect against loss. Please see prospectus for full disclosure information.

The “net asset value” (NAV) of an ETF is determined at the close of each business day, and represents the dollar value of one share of the ETF; it is calculated by taking the total assets of an ETF subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as an ETF's intraday trading value. Investors should not expect to buy or sell shares at NAV. Total returns are based upon closing “market price” (price) of the ETF on the dates listed.

Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.

Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR or visit Please read the prospectus and summary prospectus carefully before investing.

Not FDIC Insured — No Bank Guarantee — May Lose Value

Van Eck Securities Corporation, Distributor
335 Madison Avenue, New York, NY 1001

MacMillan Communications
Mike MacMillan/Chris Sullivan, 212-473-4442
View Comments (0)