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Van Eck To Add Emerging Market Bond ETFs

Cinthia Murphy

Van Eck Global, the New York-based fund manager behind the Market Vectors ETFs, filed paperwork with U.S. regulators to market two more emerging market bond funds that would go head-to-head with some sizable competition from providers such as WisdomTree and iShares.

The Market Vectors Emerging Markets Aggregate Bond ETF and its dollar-denominated counterpart, the Market Vectors Emerging Markets USD Aggregate Bond ETF , would each own developing economies’ sovereign and nongovernment debt, both investment-grade and junk, with the latter being a dollar-denominated portfolio.

Neither filing detailed what indexes will underlie the funds, nor their costs or tickers. In fact, the filings provided little detail other than to say that the strategies would replicate their benchmarks through representative sampling.

The funds would join Van Eck’s other two emerging market debt funds, one focused on government-issued local currency debt—the $760 million Market Vectors Emerging Markets Local Currency Bond ETF (EMLC)—and the other focused on Latin American debt—the Market Vectors LatAm Aggregate Bond ETF (BONO), which has under $10 million in assets gathered in just over a year.

Emerging markets debt funds have grown in popularity for their attractive yields relative to developed market bonds at a time when investors are searching for income opportunities in a near-zero interest rate environment. But their performances vary significantly, as does their exposure to currency risk, as IndexUniverse’s analyst Paul Britt recently pointed out in a blog .

Perhaps one of the most successful funds in the local currency debt space is the WisdomTree Emerging Markets Local Debt Fund (ELD), which has gathered more than $1.2 billion in two years. ELD has an average yield to maturity of 4.6 percent, according to information on the company’s website.

iShares’ JPMorgan USD Emerging Markets Bond Fund (EMB) is another big act to follow, with more than $5.4 billion tied to its dollar-denominated debt portfolio launched back in 2007. EMB’s average yield to maturity is currently pegged at 4.2 percent.


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