NEW YORK--(BUSINESS WIRE)--VanEck announced today that it has launched a new exchange-traded fund (ETF) designed to give investors exposure to investment grade U.S. dollar-denominated sovereign emerging markets (EM) bonds.
The VanEck VectorsTM EM Investment Grade + BB Rated USD Sovereign Bond ETF (NYSE Arca: IGEM) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the J.P. Morgan Custom EM Investment Grade Plus BB-Rated Sovereign USD Bond Index (the “Index”).
“For investors seeking income, U.S. dollar-denominated EM investment grade sovereign bonds have historically proven attractive, delivering a yield premium of 49 basis points over U.S. dollar-denominated corporate investment grade bonds, and 220 basis points over 10-year U.S. Treasuries over the last five years1,” said Fran Rodilosso of VanEck, who will act as one of the portfolio managers for the fund. “In the case of IGEM, a minimum of 80 percent of the portfolio is generally invested in investment grade rated bonds, but it can also include up to 20 percent in BB-rated bonds, while avoiding countries rated single-B and below. And, because these bonds are denominated in dollars, U.S.-based investors limit exposure to EM local currency volatility,” said Rodilosso.
With global bond yields reaching new lows, and an increasing amount of negative yielding government bonds, investors have turned to higher yielding asset classes to add income to their portfolios. However, investors must balance the incremental yield achieved with the additional risks associated with these investments, such as credit or currency risk. “By focusing on the higher rated subset of the market, IGEM can potentially provide yield enhancement, without adding a significant amount of credit or currency risk, to income-oriented investors’ portfolios,” Rodilosso noted.
IGEM has a gross expense ratio of 0.45% and a net expense ratio of 0.40%, which is capped contractually until September 1, 20171. IGEM joins VanEck’s suite of emerging markets bond ETFs, which includes VanEck Vectors J.P. Morgan EM Local Currency Bond ETF (NYSE Arca: EMLC), VanEck Vectors Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM), and VanEck Vectors Emerging Markets Aggregate Bond ETF (NYSE Arca: EMAG).
About Van Eck
VanEck’s mission is to offer investors intelligently designed investment strategies that take advantage of targeted market opportunities. Founded in 1955, we were a pioneer in global investing with a history of placing clients’ interests first in all market environments. Today, the firm continues this tradition by offering innovative active and passive investment portfolios in hard assets, emerging markets, precious metals, fixed income, and other alternative asset classes. VanEck Vectors ETPs span a range of sectors, asset classes and geographies. VanEck Vectors is one of the largest ETF families in the world, managing close to 70 funds globally.
As of May 31, 2016, VanEck managed approximately $31.65 billion in assets, including mutual funds, ETFs, and institutional accounts.
1 Cap excludes certain expenses, such as interest.
Ratings are based on J.P. Morgan composite ratings, which is based on the middle rating of the S&P, Moody’s and Fitch ratings to determine an instrument’s ratings category. When a rating from only two agencies is available, the lower is used; when only one agency rates a bond, that rating is used. Securities are categorized as Investment Grade if two out of three ratings from Moody’s, S&P and Fitch are Baa3/BBB-/BBB- or higher. If a security has two ratings, both must be Baa3/BBB-/BBB- or higher. Otherwise, securities are categorized as High Yield.
An investment in the Fund may be subject to risks which include, among others, credit risk, call risk, interest rate risk, and sovereign and quasi-sovereign bond risk, all of which may adversely affect the Fund. High yield bonds may be subject to greater risk of loss of income and principal and are likely to be more sensitive to adverse economic changes than higher rated securities. International investing involves additional risks which include greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity and political instability. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.
VanEck Vectors EM Investment Grade + BB Rated USD Sovereign Bond ETF (IGEM) is not sponsored, endorsed, sold or promoted by J.P. Morgan and J.P. Morgan makes no representation regarding the advisability of investing in IGEM. J.P. Morgan does not warrant the completeness or accuracy of J.P. Morgan Custom EM Investment Grade Plus BB-Rated Sovereign USD Bond Index. "J.P. Morgan" is a registered service mark of JPMorgan Chase & Co. © 2016. JPMorgan Chase & Co. All rights reserved.
Index returns are not Fund returns and do not reflect any management fees or brokerage expenses. Investors cannot invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Index returns assume that dividends have been reinvested.
The “Net Asset Value” (NAV) of a VanEck Vectors exchange-traded fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF’s intraday trading value. VanEck Vectors ETF investors should not expect to buy or sell shares at NAV.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called creation units and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information call 800.826.2333 or visit vaneck.com/etfs. Please read the prospectus and summary prospectus carefully before investing.
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1 Source: J.P. Morgan