Market Vectors ETF Trust has launched the Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM), designed to focus solely on the U.S. dollar-denominated non-sovereign segment of the EM high-yield bond market.
The ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of The BofA Merrill Lynch High Yield US Emerging Markets Liquid Corporate Plus Index (EMHY). This index is comprised of U.S. dollar-denominated bonds issued by non-sovereign emerging market issuers that are rated below investment grade.
In order to qualify for inclusion in the Index, an issuer must have risk exposure to countries other than members of FX G10, which is defined as including Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States, as well as all Western European countries and territories of the U.S. and Western European countries.
Market Vectors cited data from Bank of America Merrill Lynch, stating that this segment has grown 265 percent since 2003, according to data from
“This corner of the high-yield debt market has grown significantly in recent years and investor exposure may not have kept pace,” said Francis Rodilosso, Portfolio Manager with Market Vectors. “For investors seeking yield this is significant as USD-denominated EM high yield corporate bonds are currently generating higher yields than USD-denominated EM high-yield sovereign bonds and U.S. high-yield corporates.”
As of April 30, the fund had 18.35% of its assets in the financial sector; 63.79% in industrials; 7.50% in government guaranteed and local authorities and 10.35% in utilities.
The high yield emerging market fund is Market Vectors’ 49th ETF, and has a net expense ratio of 40 basis points, which is capped at least until September 1, 2013.