Market Vectors’ Fran Rodilosso: Emerging Market Debt Remained Positive in the Wake of Various Crises

Business Wire


Volatile situations in Ukraine and Venezuela have caught the attention of the world and continue to have potentially major ramifications for those countries and others. However, Emerging Market bonds have remained mostly in positive territory year to date, according to Fran Rodilosso, fixed income portfolio manager for Market Vectors ETFs.

“The crisis in Ukraine obviously has potentially major implications for that nation, Russia and beyond, while Venezuela remains volatile as well,” said Rodilosso. “However, although those countries have dominated the headlines in recent weeks, Emerging Market debt has managed to eke out a positive overall return so far in 2014.”

Rodilosso pointed to the performance of the Market Vectors EM Aggregate Bond Index (MVEMAG), the underlying index for the Market Vectors Emerging Markets Aggregate Bond ETF (NYSE Arca: EMAG), which as of March 11, 2014 was up 0.50 percent year to date. MVEMAG is unique in the breadth of its exposure, as it is comprised of sovereign and corporate Emerging Market bonds denominated in U.S. dollars, Euros or local Emerging Markets currencies, while also including both investment grade and below investment grade-rated securities.

Looking at the various categories of bonds included in MVEMAG, Rodilosso notes that as of March 11, 2014, hard currency EM debt is up 1.97 percent year to date among sovereign issuers, and 1.57 percent among corporate issuers. “While those returns trail the return of 10-year U.S. Treasuries, they hardly reflect a crisis-like sell-off,” he added.

“Part of the reason that Emerging Market debt has proven so resilient in the face of the situations in Ukraine and Venezuela may be that EM debt and currency valuations went through a rather sizable adjustment in 2013,” continued Rodilosso. “More risk appeared priced into large segments of the market at the start of 2014 than had been the case a year earlier.”

Rodilosso also pointed out that local currency EM debt markets continue to underperform, with negative returns overall driven by currency weakness rather than local bond prices. The local currency sovereign debt component of MVEMAG was down -0.85 percent year to date as of March 11, 2014, and not surprisingly Russia has been among the worst performers so far this year in this category. Countries that experienced fairly large corrections in their local currency markets last year, Indonesia and Brazil are among the most positive performers in the MVEMAG index year to date.

Mr. Rodilosso has over 20 years of experience trading and managing risk in fixed income investment strategies, including more than 17 years covering emerging markets. In addition to EMAG, the Market Vectors ETFs under his watch are Renminbi Bond ETF (NYSE Arca: CHLC®), Treasury-Hedged High Yield Bond ETF (NYSE Arca: THHY), Investment Grade Floating Rate ETF (NYSE Arca: FLTR®), Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC®), Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM®), International High Yield Bond ETF (NYSE Arca: IHY®) and Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL®). As of December 31, 2013 the total assets for these ETFs amounted to approximately $1.4 billion.

Please note that the information herein represents the opinion of the portfolio manager and these opinions may change at any time and from time to time. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. ©2014 Van Eck Global.

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.

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