As things stand today, 2025 will go down as another record year for ETF launches. Or at the very least, a credible run at that record will have been notched. That is to say the industry remains as competitive as ever and there’s no sign of that abating.
For issuers, there are important lessons in the still-robust pace of ETF launches, e.g., standing out is as advantageous as is good timing. The Neuberger Berman Emerging Markets Debt Hard Currency ETF (NEMD ), which came to market last month, certainly checks the good timing box. And that’s for a good reason: Emerging markets debt is among the best-performing corners of the bond market this year.
NEMD also has enviable DNA. While it’s new in ETF form, it had a roughly 12-year run as the Neuberger Berman Emerging Markets Debt Fund. That was an open-end mutual fund. In those two iterations, NEMD entered Monday with a YTD gain of 11.72%. That’s roughly triple what investors earned with domestic aggregate bond funds.
NEMD ETF Outlook Remains Bright
NEMD’s holdings are denominated in “hard currencies,” which are defined as currencies of major industrialized nations. That includes the U.S. dollar. As has been widely documented, the greenback is flailing this year. That’s providing a tailwind to dollar-denominated emerging market debt. That’s because as the dollar falters, issuers’ financing costs decrease.
“Emerging-market bond funds hold US-dollar-denominated bonds from emerging-market countries. Most of these funds primarily hold government bonds, also called sovereign bonds, but emerging market corporate bonds are often found in their portfolios,” noted Morningstar’s Gabe Alpert. “Among Morningstar’s 23 fixed-income categories, emerging-market bond funds are the top performer in 2025, except for local-currency emerging-market bond funds, which hold debt denominated in those countries’ currencies instead of US dollars.”
As an actively managed ETF, NEMD has the flexibility to capitalize on the weak dollar tailwind and other potential catalysts for emerging market debt. The fund currently holds 227 bonds. But its selection universe can be as large as 500+ corporate issuers across 90 developing economies. NEMD being an active fund is important for another reason. Its experienced management team can more swiftly react to macroeconomic conditions than index-based rivals.
“Against this backdrop, a number of emerging-market countries moved to implement reforms aimed at improving their creditworthiness. They raised rates higher and quicker than the Fed to head off inflation,” added Alpert.
Speaking of the Fed, assuming it lowers rates this month, that’d likely be another headwind for the dollar, potentially increasing the allure of NEMD along the way.
For more news, information, and analysis, visit the Invest Beyond Cash Content Hub.
