Market Vectors EM Bond ETF Tops $1.5B In AUM

While emerging markets equities lag, investors continue to pour cash into select ETFs that track developing world bonds. Well, at least one ETF, that being the Market Vectors Emerging Markets Local Currency Bond ETF (EMLC), which now has more than $1.5 billion in assets under management. Market Vectors made the announcement earlier today.

To be precise, EMLC had $1.529 billion in AUM as of March 4, according to the ETF's web page. The announcement comes less than three months after Market Vectors said EMLC had topped $1 billion in assets.

"Many local currency-denominated emerging markets bonds are currently delivering more attractive yields than traditional fixed income investments while at the same time offering currency and credit fundamentals that appear to be on more solid footing than fixed income investments denominated in U.S. Dollars, Euros or Yen," said Market Vectors Portfolio Manager Fran Rodilosso in a statement.

When EMLC debuted in July 2010, it was the first ETF to offer exposure to local currency-denominated emerging markets debt. Several other ETF sponsors have since introduced rival fund to EMLC, though the Market Vectors offering has the lowest annual expense ratio at 0.47 percent.

Amid investors' thirst for yield, emerging markets bond ETFs, both dollar-denominated and local currency funds, soared in popularity and assets last year. Investors poured $21.3 billion into emerging markets debt funds last year with 23 percent of that total going to local currency funds, the Wall Street Journal reported. That figure rose to 37 percent in January, according to the Journal.

Following aggressive interest rate cuts by some developing world central banks, emerging markets local debt outperformed high-yield bonds in some instances. With the rate cut cycle likely over in the emerging world, bonds issued there may get the benefit of currency appreciation this year.

EMLC has 225 holdings, more than 57 percent of which are rated investment-grade. The ETF has a yield to maturity of 5.27 percent and an average effective duration of 5.04 years. Top country weights include Brazil, Mexico, Poland, South Africa, Malaysia, Russia and Turkey.

BY The ETF Professor