Market Vectors Emerging Markets Local Currency Bond ETF (EMLC) has received a risk-based capital designation of 2 from the Securities Valuation Office (SVO) of the National Association of Insurance Commissioners (NAIC).
SVO ratings range from 1 to 6, with 1 being highest available.
EMLC seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the JP Morgan GBI-EMG Core Index. The underlying index provides exposure to local currency bonds issued by emerging market governments. As such, the fund is subject to the risks of investing in emerging market debt securities.
EMLC has a gross and net expense ratio of 0.47 per cent, which is capped at least until 1 September 2013. The cap excludes certain expenses, such as interest.
“As insurance companies expand the use of ETFs in their portfolios, an SVO designation provides guidance as to the quality of a fund’s underlying holdings,” says Susan Marino, senior vice president and head of national accounts at Van Eck Global. “EMLC was the first US-listed ETF to invest in emerging market bonds denominated in local currencies, and it has grown to approximately USD1.4 billion in assets as of 31 May of this year. We are pleased it has been given a rating of ‘2′, the second-highest quality rating available.”
NAIC is the US standard-setting and regulatory support organisation created and governed by the chief insurance regulators of the 50 states, the District of Columbia and five US territories. The SVO is responsible for day-to-day credit quality assessment and valuation of securities owned by state regulated insurance companies. The assignment of an NAIC designation allows a fixed income exchange traded fund to be reported as a bond, and therefore receive a more favourable risk-based capital treatment.
