Market Vectors ETF Trust announced today that it has launched its Emerging Markets High Yield Bond ETF (NYSEARCA:HYEM), the first exchange-traded fund (ETF) designed to focus solely on the U.S. dollar (USD)-denominated non-sovereign segment of the EM high-yield bond market – a segment that has grown 265 percent since 2003, according to data from Bank of America Merrill Lynch.
HYEM seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of The BofA Merrill Lynch High Yield US Emerging Markets Liquid Corporate Plus Index (EMHY), which is comprised of U.S. dollar-denominated bonds issued by non-sovereign emerging market issuers that are rated below investment grade. In order to qualify for inclusion in the Index, an issuer must have risk exposure to countries other than members of FX G10, defined as including Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States, as well as all Western European countries and territories of the U.S. and Western European countries.
“This corner of the high-yield debt market has grown significantly in recent years and investor exposure may not have kept pace,” said Francis Rodilosso, Portfolio Manager with Market Vectors. “For investors seeking yield this is significant as USD-denominated EM high yield corporate bonds are currently generating higher yields than USD-denominated EM high-yield sovereign bonds and U.S. high-yield corporates.1” In addition to their competitive yields, EM corporate high-yield bonds have had historically lower default rates than similar debt instruments issued in the U.S.2, added Mr. Rodilosso.
Mr. Rodilosso also notes that investing in emerging market high-yield debt, and high-yield securities in general, is not without risks, including the inherent volatility of high-yield security prices, changes in interest rates, currency risks, extreme volatility, political uncertainty, and more.
“Existing EM high-yield bond ETFs tend to focus on sovereign debt. With HYEM, the emphasis is on USD-denominated corporate debt, which now accounts for over 10% of the global high-yield corporate bond market3,” said Edward Lopez, Marketing Director with Market Vectors. “Through this fund, investors now have a simple, transparent way to add targeted exposure to this segment of the high-yield market.”
HYEM joins a series of innovative Market Vectors ETFs focused on underrepresented areas of the high-yield bond market including International High Yield Bond ETF (NYSEARCA:IHY) and Fallen Angel High Yield Bond ETF (NYSEARCA:ANGL). These ETFs allow investors to gain exposure to important segments of the high-yield market that, in the past, may have been difficult to access.
HYEM, Market Vectors’ 49th ETF, has a gross expense ratio of 0.53 percent and a net expense ratio of 0.40 percent, which is capped at least until September 1, 2013. Cap excludes certain expenses, such as interest.
1As represented by The BofA Merrill Lynch High Yield US Emerging Markets Liquid Corporate Plus Index for USD-denominated EM high-yield corporate bonds, The BofA Merrill Lynch USD Emerging Markets Sovereigns Index for USD-denominated EM high-yield sovereign bonds and The BofA Merrill Lynch U.S. High Yield Master Index II for U.S. high yield corporate bonds.
2Source: Standard & Poor’s Global Fixed Income Research and Standard & Poor’s CreditPro®; 2011 Annual Global Corporate Default Study and Rating Transitions
3As represented by The BofA Merrill Lynch Global High Yield Index for global high-yield corporate bonds.
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 $23.7 billion in assets under management, making it the fifth largest ETP family in the U.S. and the eighth largest worldwide as of December 31, 2011.
Market Vectors ETFs are distributed 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 $33.1 billion in investor assets as of December 31, 2011.
The Fund may be subject to credit risk, interest rate risk and a greater risk of loss of income and principal than higher rated 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 contains this and other information, call 888.MKT.VCTR or visit marketvectorsetfs.com. Please read the prospectus and summary prospectus carefully before investing.
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