WisdomTree Emerging Corporates ETF A First
March 08, 2012
WisdomTree, the publicly traded New York-based ETF sponsor, today rolled out the market’s first broad-based emerging market corporate bond ETF, beating iShares and State Street Global Advisors to the punch.
The WisdomTree Emerging Markets Corporate Bond Fund (NasdaqGM: EMCB) is an actively managed portfolio consisting of dollar-denominated investment-grade corporate bonds from issuers in Asia, Latin America, Eastern Europe, Africa and the Middle East. the fund, which is listed on the Nasdaq exchange, has an annual expense ratio of 0.60 percent.
EMCB is an active fund that grants Legg Mason’s subsidiary Western Asset Management broad discretion in choosing credits. That process is crucial to keeping investors out of highly volatile countries and away from illiquid securities, Matthew Duda, EMCB’s portfolio manager, told IndexUniverse in a telephone interview.
While macroeconomic factors matter, company-specific factors should push emerging market corporate bond returns, especially as sovereign risks ease over time, Duda said. More generally, EMCB should capture the yield that premium emerging market corporate bonds carry relative to similar U.S. corporate debt, he said.
“The fund is one more tool for investors who are looking for yields,” the company’s president Bruce Lavine told IndexUniverse in telephone interview. “EMCB should get strong yields while providing a margin of safety for investors.”
Indeed, dollar-denominated emerging market debt strategies are often used as a safety net for investors looking to stabilize exposure to the often-volatile developing economies, all the while raking in income.
“These bonds are supported by the same favorable growth rates, attractive demographics, and improving fundamentals which have driven strong relative returns in emerging market assets in general,” Lavine noted in a press release.
EMCB will eventually go head-to-head with similar strategies from iShares and SSgA, but those funds, which are passively managed, are still sitting in the Securities and Exchange Commission’s pipeline.
EMCB complements WisdomTree’s growing roster of fixed-income funds, particularly its longer-duration emerging market bond strategies, the sovereign bond-focused “ELD”—the market’s single largest developing-country bond ETF with $1.2 billion in assets—and its Asian counterpart “ALD.”
EMCB, however, taps into shorter- to mid-duration debt—the bulk of the portfolio consists of bonds between two to 10 years, according to the company. The fund’s holdings currently have nearly eight years’ average maturity.
The ETF was seeded with almost $45 million, according to information posted on WisdomTree’s website.
The competing funds still in registration from iShares and SSgA are also dollar denominated.