The Market Vectors Emerging Markets Local Currency Bond ETF (EMLC) also tries to reflect movements in local currency bonds issued by emerging market governments. The fund has $497 million in assets, an expense ratio of 0.49% and yields 5.7%. Top country allocations include Brazil at 10%, Poland 10%, South Africa 10%, Mexico 10% and Malaysia 9.6%. The ETF caps holdings at 10% to help limit the influence any single region may have on the overall portfolio.
The iShares Emerging Markets Local Currency Bond (LEMB) is the latest addition to the asset category. LEMB tries to reflect the Barclays Capital Emerging Markets Broad Local Currency Bond Index, which is a market-value-weighted index that follows the performance of emerging market sovereign debt denominated in their local currencies. The fund has $29.2 million in assets, an expense ratio of 0.60% and provides a yield of 5.4%. Top country allocations include Korea 20.2%, Brazil 13.5%, Mexico 6.8%, Poland 5.5% and Indonesia 4.5%. LEMB leans toward emerging markets with more developed and liquid bond markets.
Investors seeking a more narrowly focused emerging market bond ETF may consider the WisdomTree Asia Local Debt Fund (ALD), which tries to reflect local debt denominated in currencies of Asia Pacific countries, excluding Japan. The fund has $396.5 million in assets, an expense ratio of 0.55% and a yield of 2.2%. Top country allocations include Thailand 11.4%, Malaysia 11.4%, Indonesia 11.2%, Australia 11% and South Korea 11%. ALD is similar to WisdomTree's Emerging Markets Local Debt ETF ELD, except it only holds bonds from Asia Pacific countries.
Investors frustrated with rock-bottom U.S. Treasury yields may find emerging market bond ETFs an attractive alternative. The investments should help provide an international diversification component to any portfolio while generating some extra income in a low-yield environment.
Full disclosure: Tom Lydon's clients hold shares of EMB.