Inverse and leveraged ETF provider Direxion has launched the Direxion Daily Emerging Markets Bond Bull 3X Shares (NYSE Arca: EMBU), providing triple-leveraged exposure to the performance of US dollar-denominated bonds issued by 55 emerging market countries.
Sylvia Jablonski, managing director at Direxion.
EMBU returns 300% of the daily performance of the JP Morgan EMBI Global Core Index. The index limits the weights of countries with higher outstanding debt and increases the weights of countries with lower outstanding debt. As of 31 July 2017, the largest country exposures within the index are to Mexico (6.0%), Indonesia (5.0%), Turkey (4.6%), Russia (4.4%) and Philippines (4.0%). It includes both fixed-rate and floating-rate instruments issued by sovereign and quasi-sovereign entities from eligible countries.
The index has performed well in recent years, gaining 4.9% (total return) over the past year and 4.8% per annum over the past five years.
“Emerging market bonds can offer the opportunity to gain higher yield and return, which has been the case recently,” said Sylvia Jablonski, managing director at Direxion. “Traders often look to emerging market bonds as a means to support or express bullish views on the prospect for growth and development of these nations.”
The fund is offered with a total expense ratio (TER) of 1.07% due to a contractual fee waiver in place until at least September 2018. Its gross expense ratio is 1.08%.
Inverse and leveraged ETFs are intended only for investors with an in-depth understanding of the risks associated with seeking leveraged investment results, and who plan to actively monitor and manage their positions. While these funds may provide an efficient means for sophisticated traders to obtain tactical exposures, they are generally considered unsuitable for retail investors who may not fully understand the risks involved, such as the potential for considerable losses in volatile but range bound markets if the fund is held for an extended period.
Investors looking for unhedged exposure to the JP Morgan EMBI Global Core Index may try the iShares JP Morgan USD Emerging Markets Bond ETF (Nasdaq: EMB) which has $11.8bn in assets under management (AUM) and a TER of 0.39%.
A Europe-listed version of the fund is available; the iShares JP Morgan $ EM Bond UCITS ETF (LON: SEMB) has $8.0bn in AUM and a TER of 0.45%.