JP Morgan launched a new fund, JPMorgan (NYSE:JPM) USD Emerging Markets Sovereign Bond ETF JPMB, on Jan 30, 2018, focused on providing long exposure to emerging market bonds.
Emerging market USD denominated bond funds offer great diversification benefit, as it is well spread out between multiple emerging market nations. It provides higher yields than what investors can expect to earn domestically, while keeping the portfolio safe from currency fluctuations.
Fund Characteristics
The fund seeks to provide exposure to USD denominated sovereign debt across emerging markets. The fund seeks investment results that closely correspond to the performance of the JPMorgan Emerging Markets Risk-Aware Bond Index, before fees and expenses.
The fund has amassed $48.7 million within a few days of trading and charges a fee of 49 basis points a year. It has 140 holdings in its portfolio and has top exposure to government bonds, corporate bonds and agency bonds, with 81%, 14% and 4% exposure, respectively.
How Does it Fit in a Portfolio?
This ETF is a good play for investors looking for some high risk exposure to emerging markets, while mitigating some risk that comes with emerging market equity investments. It has the potential to serve as a diversifying investment for investors, as it exposes investors to international fixed income markets, while mitigating currency risk.
“Fixed income ETFs continue to be amongst the fastest growing areas of the ETF industry, a momentum which we expect to continue as these products mature and evolve. Fixed income ETFs offer lower-cost, convenience, transparency and intra-day access and can be used to help build more robust portfolios and solve for a variety of investment needs,” concluded Bryon Lake, international head of ETFs for J.P. Morgan Asset Management.
As a result, we believe this ETF has good potential to diversify investors’ portfolio of across asset classes and geographies.
Competition
The fund faces immense competition from other funds focused on providing exposure to the same space. Below we discuss a few ETFs that seek to provide exposure to this corner (see all Emerging Market Bond ETFs here).
iShares J.P. Morgan USD Emerging Markets Bond ETF (AX:EMB)
This fund offers exposure to USD denominated emerging market bonds. From a geographical look, it has high exposure to Mexico, Indonesia and Russian Federation, with 6.2%, 5.0% and 4.4% exposure, respectively (as of Feb 14, 2018).
It has AUM of $11.7 billion and charges a fee of 39 basis points a year. It has returned 3.8% in a year but has lost 3.2% so far this year.
PowerShares Emerging Markets Sovereign Debt (TO:PCY)
This fund offers exposure to USD denominated emerging market bonds. From a geographical look, it has high exposure to El Salvador, Ukraine and Brazil, with 4.2%, 3.9% and 3.8% exposure, respectively (as of Feb 14, 2018).
It has AUM of $5.1 billion and charges a fee of 50 basis points a year. It has returned 2.5% in a year but has lost 3.8% so far this year.
Vanguard Emerging Markets Government Bond ETF VWOB
This fund offers exposure to USD denominated emerging market bonds. From a geographical look, it has high exposure to China, Mexico and Brazil, with 16.3%, 8.1% and 7.1% exposure, respectively (as of Jan 31, 2018).
It has AUM of $978.7 million and charges a fee of 32 basis points a year. It has returned 3.5% in a year but has lost 2.2% so far this year.
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ISHARS-JPM EM B (EMB): ETF Research Reports
PWRSH-EM SVN DP (PCY): ETF Research Reports
VANGD-EM GOV BD (VWOB): ETF Research Reports
JPM-USD EM SB (JPMB): ETF Research Reports
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Zacks Investment Research