NEW YORK--(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.
Index performance is not illustrative of fund performance. Fund performance current to the most recent month end is available by visiting marketvectorsetfs.com.
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 Fund’s underlying securities may be subject to call risk, which may result in the Fund having to reinvest the proceeds at lower interest rates, resulting in a decline in the Fund’s income.
Market Vectors EM Aggregate Bond Index (the “Index”) is the exclusive property of Market Vectors Index Solutions GmbH (the “Index Provider”), which has contracted with Solactive AG (the “Calculation Agent “) to calculate the Index. The Calculation Agent is not an adviser for or a fiduciary to any account, fund or ETF managed by Van Eck Associates Corporation. The Calculation Agent is not responsible for any direct, indirect, or consequential damages associated with indicative optimized portfolio values and/or indicative intraday values. Market Vectors Emerging Markets Aggregate Bond ETF (the “Fund”) is not sponsored, endorsed, sold or promoted by the Index Provider, which makes no representation regarding the advisability of investing in the Fund.
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 the Market Vectors Emerging Markets Aggregate Bond ETF (the “Fund”) prospectus for full disclosure information.
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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, in general, 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 marketvectorsetfs.com. Please read the prospectus and summary prospectus carefully before investing.
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