VanEck Lowers Fees On A Pair Of Emerging Market Bond ETFs

VanEck said it is lowering the expense ratios on two of its exchange traded funds that track emerging markets debt.

The pair includes the VanEck Vectors J.P. Morgan EM Local Currency Bond ETF EMLC, the largest ETF holding emerging markets bonds denominated in local currencies.

What Happened

In a statement out last Friday, New York-based VanEck said it is trimming EMLC's annual fee from 0.42 percent to 0.3 percent, or $30 on a $10,000 investment.

“EMLC is the largest and most liquid U.S. listed ETF providing access to emerging markets local currency bonds. It seeks to track the J.P. Morgan GBI-EMG Core Index, which is comprised of bonds issued by emerging markets governments and denominated in the local currency of the issuer,” according to the statement.

The $4.6-billion EMLC is nearly eight years old. EMLC holds 276 bonds and has a 30-day SEC yield of 6.13 percent. The ETF's effective duration is 5.09 years.

Why It's Important

The VanEck Vectors Emerging Markets Aggregate Bond ETF EMAG also received a lower expense ratio. VanEck pared EMAG's annual fee from 0.49 percent to 0.35 percent.

“EMAG is the only U.S.-listed ETF that provides comprehensive exposure to the full emerging markets debt opportunity set,” according to VanEck. “It seeks to track the MVIS EM Aggregate Bond Index, which is comprised of emerging market sovereign bonds and corporate bonds denominated in U.S. dollars, euros, or local emerging markets currencies, and includes both investment-grade and below-investment grade rated securities.”

EMAG recently turned seven years old. The $14.5-million ETF has a 30-day SEC yield of 4.58 percent and holds 169 bonds. EMAG's effective duration is 4.69 years.

What's Next

EMLC allocates over 36 percent of its combined weight to Brazil, Indonesia, Mexico and Poland. EMAG's top four country weights are, in order: Mexico, Brazil, Russia and China.

Emerging markets bond funds are struggling this year amid dollar strength and speculation that the Federal Reserve will continue raising interest rates. The asset class has also been hampered by surprise rate hikes in Argentina and Turkey, among other developing economies.

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