Vaneck has cross-listed its VanEck Vectors JP Morgan EM Local Currency Bond UCITS ETF (EMLC) on the SIX Swiss Exchange where it trades in Swiss francs. The ETF already trades on the London Stock Exchange in GBP and USD, and on Deutsche Börse and Borsa Italiana in EUR.
The ETF tracks the performance of government bonds issued by 16 emerging countries.
Launched in Europe in April 2017, the fund tracks the JP Morgan Government Bond Index – Emerging Markets Global Core Index, a reference for the performance of bonds issued in local currencies by 16 emerging market governments: Argentina, Brazil, Chile, Colombia, Hungary, Indonesia, Malaysia, Mexico, Peru, Philippines, Poland, Romania, Russia, Thailand, Turkey, and South Africa.
Philipp Schlegel, director international business development at VanEck said: “We are pleased to add EMLC to our ETF line-up in Switzerland that also includes two gold mining equity ETFs and MOAT, a strategic beta ETF. Investor interest in emerging markets has risen in the past few yearsas investors recognise the potential for higher economic growth than in developed markets. EMLC reflects our commitment to offering forward-looking investment solutions that strengthen a long-term portfolio.”
The index is market-cap weighted and rebalanced monthly, with individual country exposure capped at 10% to enhance diversification. A country floor of 3% is also applied.
Bonds from Brazil, Poland, Indonesia and Mexico each hold the maximum allowable weighting of 10% in the ETF, while South Africa (8.8%), Turkey (6.7%) and Colombia (6.2%) make up the next largest country exposures.
Schlegel added: “EMLC allows investors to participate in local emerging markets economies which historically have had higher yields than developed markets and potential for currency appreciation. Additionally, local currency emerging markets bonds tend to be less correlated to the U.S. dollar and thus provide a way to diversify a portfolio.”
Investors may be surprised to learn that the majority of the ETF’s holdings are of investment grade quality (67.0%), composed primarily of bonds rated ‘A’ (29.9%) and ‘BBB’ (37.1%). Bonds rated ‘BB’ make up 11.7% while unrated bonds account for 16.1%.
The ETF may suit investors seeking higher income opportunities as the index’s current yield to maturity is 6.4%. The index’s effective duration is 5.1 years and is up 9.7% year to date. (All data as of 31 May 2017).
The ETF has assets under management of $50 million and a total expense ratio of 0.44%.