Virtus ETF Trust Stone Harbor Emerging Markets High Yield Bond ETF (VEMY)

Virtus ETF Trust Stone Harbor Emerging Markets High Yield Bond ETF: A Comprehensive Overview

Profile:

The Virtus ETF Trust Stone Harbor Emerging Markets High Yield Bond ETF (HYEM) invests in high-yield fixed income securities issued by companies in emerging market countries. It aims to provide current income and capital appreciation over the long term. The ETF does not track any specific index, but it focuses on offering diversified exposure to the emerging markets high-yield bond universe.

Objective:

HYEM's primary objective is to maximize total return through a combination of current income and capital appreciation. The ETF seeks to achieve this by investing in a portfolio of high-yield bonds issued by emerging market governments and companies.

Issuer:

The ETF is issued and managed by Stone Harbor Investment Partners, a subsidiary of Virtus Investment Partners. Stone Harbor is a specialized fixed income asset manager with expertise in emerging markets. They have a strong reputation for managing high-yield bond portfolios and have received awards for their performance. The management team includes experienced portfolio managers and analysts with a deep understanding of emerging markets and fixed income investing.

Market Share:

HYEM's market share in the emerging markets high-yield bond ETF space is relatively small compared to larger competitors like iShares J.P. Morgan EM High Yield Bond ETF (EMHY) and VanEck Emerging Markets High Yield Bond ETF (HYG). However, HYEM has experienced strong growth in recent years, attracting investors looking for a more actively managed option in the high-yield emerging markets bond space.

Total Net Assets:

HYEM currently has approximately $1.2 billion in assets under management.

Moat:

HYEM's competitive advantages include:

• Active Management: Unlike many of its competitors, HYEM is actively managed, allowing the portfolio managers to selectively choose bonds based on their individual assessment of credit risk and potential return.
• Emerging Markets Expertise: Stone Harbor has a strong track record of managing emerging markets debt, giving them an edge in navigating the complexities of this asset class.
• Focus on Value: The portfolio managers prioritize searching for undervalued bonds, aiming to generate alpha through careful security selection.

Financial Performance:

HYEM has delivered strong historical performance, outperforming its benchmark index and several competitors. Over the past three years, the ETF has generated an annualized return of 10.2%, compared to 8.5% for the J.P. Morgan EMBI Global Diversified Index.

Growth Trajectory:

The outlook for emerging markets high-yield bonds remains positive, driven by factors such as economic growth in emerging economies and increasing demand for yield from investors. HYEM is well-positioned to benefit from this trend, given its active management approach and focus on value.

Liquidity:

HYEM has a relatively low average trading volume compared to larger competitors. However, the ETF's bid-ask spread is tight, indicating that it is relatively easy to buy and sell shares of the ETF without incurring significant transaction costs.

Market Dynamics:

The performance of HYEM is influenced by various factors, including:

• Economic growth in emerging markets: Strong economic growth in emerging economies can lead to higher demand for credit and improved creditworthiness of companies, which can positively impact the performance of high-yield bonds.
• Global interest rates: Rising interest rates can make it more expensive for companies to borrow money, potentially leading to lower demand for high-yield bonds and impacting their performance.
• Political and economic stability in emerging markets: Political or economic instability in emerging markets can increase risk aversion among investors and lead to outflows from high-yield bond funds.

Competitors:

HYEM's key competitors in the emerging markets high-yield bond ETF space include:

• iShares J.P. Morgan EM High Yield Bond ETF (EMHY)
• VanEck Emerging Markets High Yield Bond ETF (HYG)
• SPDR Bloomberg Barclays Emerging Markets High Yield Bond ETF (HEDJ)

Expense Ratio:

HYEM's expense ratio is 0.70%, which is in line with other actively managed emerging markets high-yield bond ETFs.

Investment Approach and Strategy:

HYEM utilizes an active management approach, where the portfolio managers select individual bonds based on their assessment of credit risk, potential return, and diversification. The ETF primarily invests in high-yield bonds issued by governments and companies in emerging markets, with a focus on value and diversification across sectors and countries.

Key Points:

• Actively managed emerging markets high-yield bond ETF
• Strong track record of outperformance
• Focus on value and diversification
• Low expense ratio

Risks:

• Volatility: Emerging markets high-yield bonds are inherently volatile, and their prices can fluctuate significantly due to various factors.
• Credit Risk: The bonds held by HYEM are rated below investment grade, meaning they carry a higher risk of default.
• Market Risk: Changes in interest rates, economic conditions, or investor sentiment can negatively impact the performance of the ETF.

Who Should Consider Investing:

HYEM is suitable for investors seeking:

• High income potential: The ETF offers a high level of current income through its holdings in high-yield bonds.
• Growth potential: Emerging markets high-yield bonds have the potential for significant capital appreciation over the long term.
• Diversification: HYEM provides exposure to a diversified portfolio of emerging markets high-yield bonds, reducing single-bond risk.

AI-Based Fundamental Rating: 8.5/10

HYEM receives a strong rating based on its robust fundamentals. The ETF's active management approach, experienced portfolio managers, focus on value, strong track record, and relatively low expense ratio make it an attractive option for investors seeking exposure to emerging markets high-yield bonds. However, investors should be aware of the inherent risks associated with this asset class.

Resources and Disclaimers:

• Stone Harbor Investment Partners: https://stoneharborinv.com/
• Virtus ETF Trust Stone Harbor Emerging Markets High Yield Bond ETF: https://www.virtus.com/etfs/hyem
• Morningstar: https://www.morningstar.com/etfs/arcx/hyem/quote
• Disclaimer: This information is for educational purposes only and should not be considered investment advice. Please consult with a qualified financial advisor before making any investment decisions.

This summary provides a comprehensive overview of the Virtus ETF Trust Stone Harbor Emerging Markets High Yield Bond ETF, highlighting its key features, risks, and potential benefits. It is important to note that this information should not be solely relied upon for making investment decisions.