Market Vectors’ Fran Rodilosso Discusses His Case for High Yield Corporate Debt Relative to Equities and Government Debt

Market Vectors’ international high-yield corporate bond portfolio manager Fran Rodilosso today commented on his outlook for high-yield corporate debt and why he believes this investment class might be worthy of investor attention in the coming months.

“In fact, over the past four years, high-yield borrowers have tended to push their maturities out when the opportunity has arisen. And to the degree institutional investors are re-investing coupons, there appears to be already decent demand for new issuance.”

“Though a number of high-yield corporate debt-focused vehicles have experienced outflows in recent weeks, there are several reasons I would point to corporate debt rather than equities or government debt in the current environment,” said Rodilosso. “First is yields, which currently far exceed those of U.S. Treasuries or German bunds, issuances which are not immune to declining values in their own rights.”

Rodilosso pointed to these additional factors supporting his views:

  • Downside protection. Equities have had their yields pushed lower recently as well, according to Rodilosso, and have exhibited greater sensitivity than high-yield credit markets to downward moves in the economy. For example, although both asset classes performed poorly, global equities, as measured by MSCI EAFE, underperformed global high-yield corporate debt, as measured by BAML Global High Yield Index, by a wide margin in 2008.
  • Credit fundamentals. “In my opinion, the high-yield corporate space is not facing a wall of insurmountable debt over the next two years,” said Rodilosso. “In fact, over the past four years, high-yield borrowers have tended to push their maturities out when the opportunity has arisen. And to the degree institutional investors are re-investing coupons, there appears to be already decent demand for new issuance.”

Rodilosso continued, noting that “In looking at the fundamentals, default rates currently remain low, and current spreads more than compensate for default near current rates. In my opinion, companies are generally in a better state than they were five years ago while developed market governments are not.”

Mr. Rodilosso joined the Market Vectors team earlier this year bringing with him more than 20 years of senior level experience in emerging market, high-yield debt research and portfolio management.

Mr. Rodilosso currently manages three Market Vectors high-yield corporate bond ETFs, Fallen Angel High Yield Bond ETF (NYSEArca:ANGL), International High Yield Bond ETF (NYSEArca:IHY) and the most recent addition to this fund family, Emerging Markets High Yield Bond ETF (NYSEArca:HYEM).

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Please note that the information herein represents the opinion of the author and these opinions may change at any time and from time to time. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Non-Van Eck Global proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

About Market Vectors ETFs

Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family currently totals $25.1 billion in assets under management, making it the fifth largest ETP family in the U.S. and eighth largest worldwide as of March 31, 2012.

Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and manages approximately $34.8 billion in investor assets as of March 31, 2012.

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer’s financial health. The Funds’ underlying securities may be subject to call risk, which may result in the Funds having to reinvest the proceeds at lower interest rates, resulting in a decline in the Funds’ income.

The Funds, as they invest in high yield securities, may also be subject to a greater risk of loss of income and principal than higher rated securities. The prices of high yield securities are likely to be more sensitive to adverse economic changes or individual issuer developments than higher rated securities. The secondary market for high yield securities may be less liquid than the market for higher quality securities and, as such, may have an adverse effect of market prices of certain securities. As the Fund may invest in securities denominated in foreign currencies and some of the income received by the Fund will be in foreign currency, changes in currency exchange rates may negatively impact the Fund’s return. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability. Investors should be willing to accept a high degree of volatility and the potential of significant loss. For a more complete description of these and other risks, please refer to the Fund’s prospectus and summary prospectus. The Fund may loan its securities, which may subject it to additional credit and counterparty risk.

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Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.

Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR or visit Please read the prospectus and summary prospectus carefully before investing.

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