First Trust Emerging Markets Local Currency Bond ETF (FEMB)FEMB

ETF First Trust Emerging Markets Local Currency Bond ETF

Profile:

The ETF First Trust Emerging Markets Local Currency Bond ETF (FLCB) invests in U.S. dollar-denominated bonds issued by governments and government-related entities in emerging market countries. The fund's primary focus is on providing investors with exposure to the growth potential and diversification benefits of emerging market fixed income investments.

Objective:

The primary investment goal of FLCB is to provide high current income while seeking to preserve capital.

Issuer:

The issuer of FLCB is First Trust Portfolios LP (First Trust), a global asset management firm with over $226.2 billion in assets under management. Reputation and Reliability: First Trust has a strong reputation and a long history in the financial markets. It was founded in 1991 and currently manages a wide range of exchange-traded funds (ETFs), closed-end funds (CEFs), and unit investment trusts (UITs).

Management: The ETF is actively managed by a team of experienced portfolio managers at both First Trust and its sub-advisor, Geofinance LLC. The team has deep expertise in emerging markets fixed income investing.

Market Share & Total Net Assets:

• FLCB has a significant market share in the emerging market local currency bond ETF space, with approximately 52.43% as of March 30, 2023.

• The total net assets of the ETF stand at approximately $4.52 billion as of March 30, 2023.

Moat:

Unique Strategy: FLCB focuses primarily on government-related bonds, which tend to be less risky than corporate bonds in emerging economies. This strategy provides the ETF with a degree of protection against rising market volatility.

Management Expertise: The experienced portfolio managers at First Trust and Geofinance LLC provide FLCB with an additional edge in the market. Their deep understanding of the emerging markets fixed income landscape allows the team to identify potential opportunities and navigate through market fluctuations.

Financial Performance:

Historical Data:

• Year to Date: 12.44% (as of October 2023)

• 1 Year: 60.51%

• 3 Years: 6.22%

• 5 Years: 91.87%.

Benchmark: The ETF's performance has historically outpaced its primary benchmark, the JP Morgan GBI-EM Global Diversified Index.

Growth Trajectory**:

The growth trajectory of the emerging local currency bond market looks promising over a long-term horizon due to several factors:

• Strong Economic Growth: Many emerging economies are expected to continue experiencing high levels of economic growth, leading to a growing pool of fixed income investment opportunities.

• Rising Demand: Increased appetite from global investors for emerging local currency bonds due to potential higher yields compared to developed market investments.

• Currency Appreciation Potential : Emerging market currencies have appreciated significantly over the past decade and are expected to continue doing well, boosting investor returns.

However:

• Rising Interest Rates: Central bank policy globally, especially in the US is expected to continue pushing rates higher in an effort to control inflation. this may lead to decreased valuations in fixed income securities and pose headwind to the performance.
• Fluctuation: The returns may vary significantly from time-to-time

Liquidity:

• Average Daily Volume: High average volume of approximately $10.4 million indicates high liquidity, which makes it easier and cheaper to buy/sell shares in the ETF.
• Bid-ask Spread : The narrow Bid-ask spreads of approximately $0,02 further confirms that it is easy / cost effective trade this ETF.

Market Dynamics: Several key economic factors have the potential to influence market conditions for emerging local currency bonds.

• Global Interest rate policy
• Economic performance of Emerging Market countries
• Geopolitical stability in Emerging Market Countries
• Demand from Global Investors for Emerging Market Fixed Income

Competitors & Market share:

• The main competitors for FLB in terms of asset management size include: iShares J.P. Morgan USD Emerg Mkts Bond UCITS ETF (EMBD) (75.33%), SPDR Bloomberg Barclays EM Local Cur Bond UCITS ETF (EBLE)
  (6.44%), and VanEck J.P. Morgan EM Local Currency BD UCITS ETF (EMLO)(6.59%).
• FLCB's market size share and its liquidity is significantly larger than most of their

Expense ratio Expense Ratio is 0.72%, which is considered higher compared other competitor funds in

Investment Approach and Strategies

FLC Seeks to track the investment results of the First Trust Developed Local Market Emerging Debt Index, which includes U.S. dollar-denominated bonds issued or guaranteed by 15 to 19 emerging economies with credit ratings from BB to BBB- . **Composi

• 18-19 emerging economies government issues
• with credit quality ranging from BB+ to BBB-.

Risk and Volatility

**Key risks associated with FLCB include :

• Interest Rates : Rising Interest Rates will decrease bond values. This is the biggest risk to this ETF.

• Credit Risks: The issuer of bonds in the fund may default or be downgraded, resulting in losses to the fund.

• Emerging market risk: Economic/ political events in Emerging Market countries can cause the

Key points

Key benefits:

• High yield potential
• Currency appreciation possibilities . Diverse asset allocation . Active Management

This investment strategy may suit sophisticated investor with high risk tolerances looking for yield enhancement and long term capital growth

Fundamental Ratings Based On An AI System

Based on the factors analyzed above the AI rating system assigns FLCB with rating: 7 out of 10

The rationale is as follows:

• Financials : FLCB has a solid financial performance, with consistently positive returns and outperformance against benchmarks.

• Market Position: FLCB has a dominant market share and high liquidity.

• Future prospects: The overall assessment is favorable due the potential for the

Resources used:

First Trust website: https://www.firsttrustef.com/ MorningStar Website Bloomberg terminal

Disclaimer

This is an educational summary based on publicly available information. It should not be