Emerging markets are an attractive option for investors looking to diversify their portfolios. They offer the potential for higher returns and lower correlation with U.S. equities. Emerging market bond ETFs are an excellent way to invest in these markets, as they tend to be more liquid than emerging market mutual funds. In this article, we’ll closely examine the EM bond ETFs that have performed the best over the past year.
EM Bond ETFs
The WisdomTree Emerging Markets Local Debt Fund (ELD ) is a relatively small actively managed ETF, with $105.7 million in assets under management (AUM). Despite its smaller size, the ELD has delivered an impressive 1-year performance of 13.58%, outpacing many of its competitors in the EM bond ETF space. The ETF has an expense ratio of 0.55%, which is higher than some of its passively managed peers. It is still competitive for an actively managed fund. The ELD’s inception date was August 9, 2010, making it a relatively mature ETF in this space.
The First Trust Emerging Markets Local Currency Bond ETF (FEMB ) is a newer actively managed ETF, with an inception date of November 4, 2014. Despite its youth, the FEMB has attracted $133.7 million in assets under management (AUM), indicating growing investor interest in this ETF. FEMB has an expense ratio of 0.85%. Which is higher than many of its peers. The FEMB’s 1-year performance of 12.48% is impressive, considering the instability in the emerging market debt sector.
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The VanEck J. P. Morgan EM Local Currency Bond ETF (EMLC ) has seen an impressive 1-year net flow of $233.62 million, indicating strong investor interest in this ETF. With $3.3 billion in assets under management (AUM), the EMLC is one of the largest EM bond ETFs available in the market. It has an expense ratio of 0.30%, making it an affordable option for investors looking to invest in emerging markets. The EMLC’s 1-year performance of 10.16% is impressive, given the volatility in the emerging market debt space. The fund’s inception date was July 22, 2010, making it a relatively mature ETF in this space.
Other EM Bond ETFs
The SPDR Bloomberg Emerging Markets Local Bond ETF (EBND ) is a passively managed ETF boasting $1.7 billion in assets under management (AUM) and an expense ratio of 0.30%. This ETF has an inception date of February 23, 2011. Despite its impressive track record, the EBND has experienced a 1-year net outflow of -496.58 M, indicating a waning investor interest. Nonetheless, the EBND remains a cost-effective option for investors seeking diversified exposure to emerging market debt. It has a lower expense ratio than the actively managed ELD. Additionally, the EBND offers an impressive breadth of investments. Which further solidifies its position as a reliable option in the EM bond ETF space.
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The iShares J.P. Morgan EM Local Currency Bond ETF (LEMB ) has garnered a 1-year net inflow of $152.36 million. Which signals an increasing demand for this passively managed ETF. While the ETF’s assets under management (AUM) are not as substantial as those of some of its competitors, with $607.6 million in AUM. It still presents a cost-effective avenue for investors to access emerging market debt. With an expense ratio of 0.30%, the LEMB is an affordable option for investors seeking exposure to the emerging market debt sector. The ETF’s inception date dates back to October 18, 2011, and despite the unpredictability of the emerging market debt space, the LEMB has demonstrated a commendable 1-year performance of 9.67%.
Conclusion
For investors seeking portfolio diversification and potentially higher returns, emerging market bond ETFs can be an appealing option due to their lower correlation with U.S. equities. This article highlights the top-performing EM bond ETFs over the past year, serving as a resource for those interested in exploring this asset class. However, it’s important to remember that past performance is not indicative of future results. As with any investment, investors should carefully consider their investment goals and risk tolerance before investing in EM bond ETFs.
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