New York-based asset manager Van Eck Global has launched the Market Vectors Emerging Markets Local Currency Bond ETF.
It is the first US-listed exchange-traded fund designed to provide investors with exposure to an index that tracks a basket of bonds issued in local currencies by emerging market governments.
The fund has a gross expense ratio of 0.60 per cent and net expense ratio of 0.49 per cent.
It seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of J.P. Morgan Government Bond Index-Emerging Markets Global Core Index.
The index currently tracks a selection of bonds issued in local currencies by 13 emerging market countries representing Latin America, Eastern Europe, Africa, and Asia: Brazil, Colombia, Egypt, Hungary, Indonesia, Malaysia, Mexico, Peru, Poland, Russia, South Africa, Thailand, Turkey.
The index is market-cap weighted, with individual country exposures capped at ten per cent to provide more diversification among countries within the index.
As of 1 July 2010 six countries met the ten per cent threshold, including Brazil, Malaysia, Mexico, Poland, South Africa and Thailand. Index rebalancing occurs monthly.
"With EMLC, we’ve created an ETF that allows investors to participate in the dynamics of the local emerging market economies, which include potential for currency appreciation and higher yields, relative to their developed market counterparts," says Jan van Eck, principal at Van Eck Global. "We’re very excited to be able to provide a means for tracking an index from the popular J.P. Morgan local currency bond index family, particularly at a time when the global markets are witnessing the growing importance of new economic leaders in regions such as Asia and Latin America."
"Over the last few years emerging markets have demonstrated resilience as much of the developed world has experienced massive fiscal deterioration and skyrocketing debt levels," adds Joyce Chang, head of global emerging markets and credit research with J.P. Morgan. "Emerging markets countries have driven global growth in recent years and have become one of the fastest growing asset classes, providing an important source of diversification for investors."