Van Eck launches emerging-markets high-yield ETF; ticker: HYEM

Van Eck has launched its third high-yield-bond-focused exchange-traded fund, the Market Vectors Emerging Markets High Yield Bond ETF, amid the ongoing expansion of this segment and heavy inflows. The new Van Eck ETF will trade on the NYSE under the symbol HYEM.

HYEM seeks to track the Bank of America Merrill Lynch High Yield U.S. Emerging Markets Liquid Corporate Plus Index, which is composed of dollar-denominated bonds issued by non-sovereign emerging market issuers that are rated below investment grade. Top holdings are Petroleos de Venezuela 8.5% notes, Vendanta Resources 8.25% paper, and Country Garden 11.125% notes, according to the prospectus.

You can read how ETFs work in our online Loan Market Primer.

At launch, there are $10 million of assets under management and the initial share price was $25, rising to $25.03 by midday. The gross expense ratio is 0.52%, and as with the the two other high-yield ETFs managed by Van Eck – the international high-yield fund IHY and the fallen-angel fund ANGL – the portfolio managers are Michael Mazier and Francis Rodilosso, according to the prospectus.

Van Eck joins several other investment managers ushering new high-yield ETFs to market this year amid heavy inflows to the asset class. Indeed, EPFR Global shows that of the $17.2 billion of cash inflows to domestic high-yield funds this year, roughly 41% of the sum, or $7.1 billion, has been directed to high-yield ETFs.

To meet that demand, asset-management firms have now launched a total of 10 new high-yield-bond-focused ETFs this year, including one short-term (0-5 years) U.S. high-yield bond fund, four with international, multicurrency exposure, two EM-focused funds, the fallen-angel index fund, and three target-maturity funds.

Van Eck in March launched the aforementioned IHY and ANGL funds. Both also track Bank of America indexes.

BlackRock launched GHYG, a global multicurrency high-yield bond fund; HYXU, a global non-U.S.-dollar high-yield bond fund; and EMHY, an emerging-markets high-yield bond fund. All three trades on the BATS Exchange.

State Street Global Advisors ushered in the short-tenor fund – the SPDR Barclays Capital Short Term High Yield Bond ETF – listed on the NYSE Arca under the symbol SJNK. The aim is to provide exposure to the asset class through shorter-duration bonds, providing less volatility and interest-rate sensitivity, the firm explained. The fund will be invested in dollar-denominated, sub-investment-grade fixed-rate bonds with remaining maturities of less than five years and a minimum issue size of $350 million.

Guggenheim Investments last month launched three new target-maturity high-yield corporate bond exchange-traded funds, adding to the firm’s four high-yield ETFs outstanding since January 2011, and nine similarly structured investment-grade corporate ETFs. The funds are called BulletShares with target maturities of 2012-2018.

The first and largest in the small but expanding sector is the iShares iBoxx High Yield Corporate Bond Fund, which trades on the NYSE Arca under the ticker HYG. The fund, which was launched in April 2007, is intended to track the iBoxx $ Liquid High Yield Index as a rules-based index consisting of approximately 50 of the most liquid and tradable dollar-denominated high-yield corporate bonds for sale in the U.S.

Since then, other index-pegged funds have launched, including JNK, PHB, and IHYG in Europe; an actively managed ETF hit the market as HYLD; and an inverse fund was created to track an index at negative 1x under the short-sale-suggestive ticker SJB. – Matt Fuller


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