Market Vectors unveils Emerging Markets High Yield Bond ETF (HYEM)

May 9th, 2012 | By | Category: Fixed Income

Van Eck has announced the launch of the Market Vectors Emerging Markets High Yield Bond ETF (HYEM), an NYSE-listed ETF that focuses solely on the dollar-denominated non-sovereign segment of the emerging market high-yield bond market.

The fund aims to track the performance of the BofA Merrill Lynch High Yield US Emerging Markets Liquid Corporate Plus Index (EMHY), which is comprised of dollar-denominated bonds issued by non-sovereign emerging market issuers that are rated below investment grade.

Market Vectors unveils Emerging Markets High Yield Bond ETF (HYEM)

Petroleos de Venezuela (PDVSA), the Venezuelan oil company, is the largest holding in the Market Vectors Emerging Markets High Yield Bond ETF (HYEM).

In order to qualify for inclusion in the index, an issuer must have risk exposure to countries other than members of FX G10, defined as including Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States, as well as all Western European countries and territories of the US and Western European countries.

The index’s top ten country weights are, as of 9 May 2012, China (13.2%), Russia (10.9%), Indonesia (8%), Venezuela (7.1%), Brazil (6.8%), Mexico (6.7%), UAE (6.1%), India (5.2%), Ukraine (4.5%) and Argentina (4.1%).

Major holdings include Petroleos de Venezuela (PDVSA), Vedanta Resources, Country Garden Holdings Co, Agile Property Holdings, VimpelCom Holdings, Yapi ve Kredi Bankasi, Evergrande Real Estate Group and ALROSA Finance.

As of 30 April 2012, the index has an average yield-to-worst of 8.93%, a modified duration of 4.34, an average years-to-maturity of 6.03 and a total of 272 issues.

“This corner of the high-yield debt market has grown significantly in recent years and investor exposure may not have kept pace,” said Francis Rodilosso, Portfolio Manager with Market Vectors. “For investors seeking yield this is significant as USD-denominated EM high yield corporate bonds are currently generating higher yields than USD-denominated EM high-yield sovereign bonds and US high-yield corporates.” In addition to their competitive yields, EM corporate high-yield bonds have had historically lower default rates than similar debt instruments issued in the US, added Rodilosso.

Edward Lopez, Marketing Director with Market Vectors, said: “Existing EM high-yield bond ETFs tend to focus on sovereign debt. With HYEM, the emphasis is on USD-denominated corporate debt, which now accounts for over 10% of the global high-yield corporate bond market. Through this fund, investors now have a simple, transparent way to add targeted exposure to this segment of the high-yield market.”

HYEM is Market Vectors’ 49th ETF and has a net expense ratio of 0.40%.

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