VanEck J.P. Morgan EM Local Currency Bond ETF (EMLC)

ETF VanEck J.P. Morgan EM Local Currency Bond ETF (EMLC) Overview:

Profile:

• Objective: Aims to provide long-term capital appreciation by investing primarily in U.S. Dollar-denominated debt securities of emerging market issuers whose interest and principal payments are denominated in the sovereign currency of their country of origin.
• Target Sector: Emerging market local currency fixed income.
• Asset Allocation: Invests across various EM government, quasi-government, and corporate debt.
• Investment Strategy: Passively tracks the J.P. Morgan EMBI Global Diversified Currency Hedged Index.

Objective: EMLC seeks to track the performance of the J.P. Morgan EMBI Global Diversified Index (USD Hedged), offering exposure to a diversified portfolio of emerging market sovereign and sub-sovereign debt instruments denominated in local currency of the issuer.

Issuer: VanEck (formerly known as VanEck Associates Corporation)

• Reputation and Reliability: Established asset manager with experience in emerging markets and fixed income investing. Positive reputation in the industry with over 75 years of history.
• Management: Portfolio managed by seasoned fixed income portfolio managers at J.P. Morgan Asset Management with extensive investment experience.

Market Share:

As of November 2023, EMLC captures approximately 8% of the Emerging Market Local Currency debt ETF market space.

Total Net Assets: EMLC manages over $6 billion in total net assets (as of November 2023).

Moat:

• Unique Exposure: Offers access to hard-to-obtain local currency emerging market bonds.
• Experienced Management: Benefitted from expertise of J.P. Morgan's fixed income team.
• Diversified Portfolio: Reduced concentration risk with exposure spread across geographically diverse and varied credit qualities.

Financial Performance:

• Positive historical returns:

  • 1-year trailing total returns: 7.99%
  • 3-year trailing total returns: 17.83%
  • 5-year trailing total returns: 29.37% (as of November 27, 2023)

• Benchmark Comparison: Exceeded its benchmark, J.P. Morgan EMBI Global Diversified Index (USD Hedged), on a risk-adjusted basis over the recent periods.

Growth Trajectory:

• Increasing investor demand for EM local currency exposure.
• Potential for continued economic growth in emerging markets.

Liquidity:

• Average Daily Trading Volume: High, exceeding 250,000 shares per day (as of November 2023), ensuring ease of purchasing and selling.
• Bid-Ask Spread: Tends to be tight, indicating low transaction cost associated with trading the ETF.

Market Dynamics:

• Economic Conditions: Sensitive to global economic performance and emerging market development.
• Interest Rates: Affected by changes in U.S. and local interest rates.
• Emerging Market Volatility: Currency fluctuations and political instabilities could impact performance.

Competitors:

• iShares JPMorgan USD Emerging Markets Bond ETF (EMB) with 74% market share.
• SPDR Bloomberg Barclays Emerging Markets Local Bond ETF (EBND) with 12.6% market share.

Expense Ratio: 0.59% per annum as of November 2023.

Investment Approach and Strategy:

• Strategy: Passively manages, replicating its benchmark index.
• Composition: Primarily invests in government and non-government bonds denominated in emerging market local currencies.

Key Points:

• Diversified exposure to local currency emerging market bonds.
• Professional management by J.P. Morgan Asset Management.
• Strong historical performance exceeding its benchmark.

Risks:

• Emerging market volatility, including currency fluctuations and political unrest.
• Interest rate risk.
• Liquidity risk of underlying bonds.

Who Should Consider Investing:

• Investors seeking diversification in Emerging Market local currency assets.