Weak Performance Spurs Emerging Market Bond Outflows (EMB)

We saw some substantial outflows last week in the largest Emerging Markets Bond focused ETF, EMB (iShares JPMorgan USD Emerging Markets Bond, Expense Ratio 0.40%, $11.9 billion in AUM).

Specifically, about $1 billion left the fund via redemption pressure. Top country allocations in EMB are as follows: 1) Mexico (6.07%), 2) Indonesia (4.98%), 3) Turkey (4.46%), 4) Russian Federation (4.36%), and Philippines (4.04%).

The fund presently holds three hundred sixty-nine individual fixed income issues from more than thirty different countries that are considered “Emerging Markets.” Even with the $1 billion in outflows, EMB is still nearly three times the size of the next largest fund in the segment, which is PCY (PowerShares Emerging Markets Sovereign Debt Portfolio, Expense Ratio 0.50%, $4.6 billion in AUM).

The rest of the top five in terms of asset size rounds out as follows: 3) EMLC (VanEck Vectors JPMorgan EM Local Currency Bond, Expense Ratio 0.44%, $3.59 billion in AUM), 4) VWOB (Vanguard Emerging Markets Government Bond, Expense Ratio 0.32%, $1 billion in AUM), and 5) LEMB (iShares Emerging Markets Local Currency Bond, Expense Ratio 0.50%, $267 million in AUM).

One may note that the two largest funds in this category are the two in which the bond valuations are denominated in U.S. Dollars, in EMB and PCY, while there has been less, but notable interest in Emerging Market Bond “basket” type funds which are denominated in local currencies.

EMB is springing back nicely today after an eight day losing streak where we saw marketplace bond prices plunge amid rapidly rising yields since the end of June, likely explaining the recent heavy redemption pressure in the fund, as portfolio managers looked to lighten positions in the space.


The iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSE:EMB) was trading at $113.54 per share on Monday morning, up $0.64 (+0.57%). Year-to-date, EMB has gained 3.01%, versus a 8.45% rise in the benchmark S&P 500 index during the same period.

EMB currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 22 ETFs in the Emerging Markets Bonds ETFs category.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.