It may have been a slow summer at the beach but it was a busy summer for many ETF providers as new exchange-traded products that offer portfolio exposure to emerging market bonds, lithium and international stocks were launched. Let’s analyze them.
Market Vectors Emerging Markets Local Currency Bond Exchange-Traded Fund (EMLC)
Van Eck Global expanded its ETF lineup by offering a new emerging market bond ETF linked to the J.P. Morgan Government Bond Index-Emerging Markets Global Core Index. This benchmark currently has 171 holdings with maturities ranging from one to 30 years. The average yield-to-maturity was 6.8 percent as of July 1, 2010.
The index currently tracks a selection of bonds issued in local currencies by thirteen emerging market countries representing Latin America, Eastern Europe, Africa, and Asia: Brazil, Colombia, Egypt, Hungary, Indonesia, Malaysia, Mexico, Peru, Poland, Russia, South Africa, Thailand and Turkey. The index is market-cap-weighted, with individual country exposures capped at 10 percent to provide more diversification among countries within the index. The fund’s net annual expense ratio is 0.49 percent.
EMLC is the first U.S.-listed ETF designed to offer investors exposure to bonds issued in local currencies by emerging market governments. Van Eck has long been a proponent of emerging markets investing, and the firm points to the potential for currency appreciation and higher yields in EM countries, relative to their develop counterparts, as part of their thinking behind launching EMLC.
Global X Lithium ETF (LIT)
LIT follows the Solactive Global Lithium Index and is comprised of common stocks, American Depositary Receipts and Global Depository Receipts of companies that are primarily engaged in the lithium industry. This includes lithium mining, exploration and lithium-ion battery production.
Currently, LIT’s underlying index contains 20 stocks which are weighted according to free-float market capitalization and reviewed semi-annually. The United States (49 percent), Chile (20 percent) and Japan (10 percent) are among the largest countries represented. The fund’s annual expenses are 0.75 percent and the index is maintained by Structured Solutions AG.
Barclays ETN+ Inverse S&P 500 VIX Short Term Futures ETN (XXV)
Do you want to make a bet on falling stock market volatility? Barclays Capital debuted an exchange-traded note or ETN that provides opposite or inverse exposure to short-term S&P 500 futures contracts. “Investors are increasingly looking for diversified ways to access equity market volatility,” said Philippe El-Asmar, head of investor solutions at Barclays Capital. “We are pleased to provide them with the first exchange traded product that allows them to express a bearish view on volatility.”
ETNs are typically linked to the performance of a currency or an index. Like bonds, ETNs carry credit default risk of the financial institution issuing them. The annual fees on XXV are 0.89 percent.
WCM/BNY Mellon Focused Growth ADR ETF (AADR)
AdvisorShares launched an actively managed international ETF which is sub-advised by institutional money manager WCM Investment Management.
The investment objective of AADR is long-term capital appreciation above international benchmarks such as the BNY Mellon Classic ADR Index and the MSCI EAFE Index.
AADR’s annual expense ratio is 1.25 percent.