Yesterday (8/9/10) WisdomTree made a little bit of a splash with the launch of WisdomTree Emerging Markets Local Debt Fund (NYSE:ELD).  We call it a “splash” because the firm apparently lined up some big buyers even before the new ETF hit the tape. Assets are already at $125 million.

ELD is very similar to Market Vectors Emerging Markets Local Currency Bond ETF (NYSE:EMLC), which also came out recently (7/23/10).  Both seek to own a portfolio of emerging market government debt denominated in local currency rather than U.S. dollars.  As noted in our story on EMLC, this gives investors exposure to foreign exchange risk as well as credit risk.  Whether these risks will carry a commensurate reward is not yet known.

There is an important difference between (EMLC) and (ELD), however.  The WisdomTree ETF is actively managed.  The fund manager has flexibility to change the country weightings on short notice instead of being tied to an index like EMLC.  This could prove helpful in the event of a sovereign debt crisis tied to a particular market.

Top country weightings in ELD are Brazil, Mexico, Indonesia, Malaysia, Thailand, Turkey and Korea.  The expense ratio is projected to be 0.55%, slightly higher than EMLC, but the final yields both look like they will be similar at around 6% currently.  This is far more than can be found in developed country government bonds – which may be one reason ELD attracted significant assets so quickly.

More information can be found on the WisdomTree site’s ELD summary page.

Written By Ron Rowland From Invest With An Edge

Ron Rowland is the founder of Invest With An Edge and serves as the Executive Editor. He is also editor of AllStarInvestor.com and Chief Investment Officer of Capital Cities Asset Management (www.ccam.com). Quoted widely in the financial media, Ron is the industry go-to guy for sector rotation insight and investment strategies using ETFs and mutual funds.

NYSE:ELD, NYSE:EMLC