Equity markets continue to oscillate this week as an upward bias mixed with uncertainty ahead of the highly anticipated FOMC meeting taking place next week has set the stage for range-bound trading. Amid the tug of war taking place on Wall Street between the bulls and bears, industry veteran Van Eck completed the conversion of the Market Vectors LatAm Aggregate Bond ETF (BONO) into the new Market Vectors Emerging Markets Aggregate Bond ETF (EMAG) on Tuesday, December 10, 2013. The conversion, which was announced in October of this year, effectively closed down BONO and launched EMAG while transferring over all assets under management into the new fund [see The Most Successful New ETFs of 2013]
The issuer also reassured existing shareholders that they do not need to take any actions as their shares will be automatically converted from BONO to an equal amount of shares of EMAG.
Under The Hood: EM Aggregate Bond ETF (EMAG)
The newly converted ETF is linked to the Market Vectors EM Aggregate Bond Index, which offers exposure to a very diverse basket of debt issues spanning the developing world. EMAG spans the following four categories in the emerging markets fixed income space, with roughly a 50/50 split among government and corporate bonds:
- U.S. dollar and euro-denominated sovereign bonds
- Local currency-denominated sovereign bonds
- U.S. dollar and euro-denominated corporate bonds
- Local currency-denominated corporate bonds
From a currency perspective, roughly half of all holdings are U.S. dollar and euro-denominated while the rest is in local emerging market currencies. In terms of credit quality, approximately 70% of the underlying debt notes boast an investment grade rating. EMAG is also well-balanced from a geographic perspective as it makes fairly equal allocations to its top five countries, which are Mexico, Brazil, Russia, China, and Poland [see Emerging Market Bonds CheatSheet].
All-in-all, EMAG is very well-balanced and diversified across all types of issuers, currencies, as well as geographies.
Meet The EM Bond Fund Competitors
EMAG joins and falls in the middle of the Emerging Markets Bonds ETFdb Category from a cost perspective as the fund charges 0.49% in net expenses compared to the average EM bond fund, which charges 0.51%.
This ETF will surely face some stiff competition from more established players already dominating the space, including:
- iShares JPMorgan USD Emerging Markets Bond Fund (EMB, B): With over $3.5 billion in assets under management
- PowerShares Emerging Markest Sovereign Debt Portfolio (PCY, B+): With over $1.8 billion in AUM
- WisdomTree Emerging Markets Local Debt Fund (ELD, A-): With over $1.2 billion in AUM
- Market Vectors Emerging Markets Local Currency Bond ETF (EMLC, A): With nearly $1 billion in AUM
EMAG warrants a closer look from anyone wanting to establish diversified exposure to the emerging markets bond asset class, but are looking to do so without having to focus on any particular types of debt or currencies.
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Disclosure: No positions at time of writing.