FRAN RODILOSSO: The Market Vectors Emerging Markets Local Currency Bond ETF, EMLC, was the first U.S.-listed ETF to track an emerging markets local currency bond index. EMLC is now three years old, having been launched in July 2010. As of June 30, 2013, EMLC's assets were over $1.2 billion, and it remained the lowest-cost emerging market local currency bond ETF, at net expenses of 47 basis points 1,2. EMLC is designed to provide access to markets, although large, that are difficult for many investors to access. EMLC's returns historically have come from three areas: income, appreciation or depreciation of bond prices and currency movements.
Emerging market local currency debt is actually the largest component of the emerging markets debt universe. It outweighs hard currency debt by a vast margin at this point in time and is growing more rapidly. It offers investors an alternative to dollar-based investments within the emerging markets universe.
RODILOSSO: EMLC seeks to track the J.P. Morgan GBI-EMG Core Index [GBIEMCOR]. The GBI-EM indexes are the most widely-followed indexes in the emerging market local currency space. Therefore, some investors see EMLC as a very good bellwether for the market as a whole. The Index's components, as of 6/30/13, were approximately 184 bonds from 16 countries, and are actually quite large and relatively liquid themselves. As of 6/30/2013, almost 90% of the Index's components had an investment-grade rating from at least one of the major ratings agencies.
RODILOSSO: Van Eck applies sampling techniques to its credit and emerging market fixed-income ETFs where a complete index replication is not really practicable.
Investment Management Team
RODILOSSO: Mike Mazier and I are co-portfolio managers of EMLC. Mike has managed the Fund since its launch in 2010. He has more than 20 years' experience in fixed-income research, portfolio management, and systems development. I joined the team in 2012 and I also have 20 years' experience in fixed-income investing, the last 18 of which have been focused on emerging markets.
RODILOSSO: Having reached its third anniversary, we consider EMLC to be time tested. Historically, its investment process, its market makers, and its creation and redemption process have held up to periods of both heavy buying and heavy selling. The team's ability to execute efficiently is a big reason why, in our opinion, the Fund has historically tracked its Index well through various market environments. EMLC recently received a rating from the National Association of Insurance Commissioners, the NAIC. As of 6/30/13, it carried a risk-based capital designation of two, the second-highest rating on the NAIC scale. 3
- - - - - - - - - -
1 Out of five funds in the EM local currency bond ETF category, according to Morningstar.
2 EMLC Fees & Expenses – Gross Expense Ratio: 0.47%; Net Expense Ratio: 0.47%. Van Eck Associates Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding interest expense, offering costs, trading expenses, taxes and extraordinary expenses) from exceeding 0.47% of the Fund’s average daily net assets per year until at least September 1, 2013. During such time, the expense limitation is expected to continue until the Fund’s Board of Trustees acts to discontinue all or a portion of such expense limitation. Cap excludes certain expenses, such as interest.
3 Preliminary NAIC Designations are the intellectual property of the National Association of Insurance Commissioners (NAIC) and are redistributed here under License. A Preliminary NAIC Designation is an opinion of the NAIC Securities Valuation Office (SVO) of the probable credit quality designation that would be assigned by the SVO to an investment if purchased by an insurance company and reported to the SVO. A Preliminary NAIC Designation is only one of the regulatory factors considered by the SVO as part of its analysis of probable regulatory treatment under the Regulatory Treatment Analysis Service (RTAS). A full discussion of such other regulatory factors is set forth in the RTAS Letter provided to Van Eck Associates Corporation. A Preliminary NAIC Designation cannot be used to report the ETF to state insurance regulators. However, the purchasing insurance company may obtain an NAIC Designation for the ETF by filing the security and final documents for the ETF with the SVO. The indication of probable regulatory treatment indicated by a Preliminary NAIC Designation is not a recommendation to purchase the ETF and is not intended to convey approval or endorsement of the ETF Sponsor or the ETF by the NAIC.
The views and opinions expressed are those of the speaker and are current as of the video's posting date. Video commentaries are general in nature and should not be construed as investment advice.
Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about Van Eck Funds, Market Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com.
Market Vectors Emerging Markets Local Currency Bond ETF (EMLC) is not sponsored, endorsed, sold or promoted by J.P. Morgan and J.P. Morgan makes no representation regarding the advisability of investing in EMLC. J.P. Morgan does not warrant the completeness or accuracy of the J.P. Morgan GBI-EMG Core Index. "J.P. Morgan" is a registered service mark of JPMorgan Chase & Co. © 2013. JPMorgan Chase & Co. All rights reserved.
Investments in emerging market securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability. As the Fund invests in securities denominated in foreign currencies and all of the income received by the Fund will be in foreign currencies, changes in currency exchange rates may negatively impact the Fund’s return. The Fund will generally invest a portion of its assets in Rule 144A securities. Rule 144A securities are restricted securities. They may be less liquid than other investments because, at times, such securities cannot be readily sold in broad public markets and the Fund might be unable to dispose of such securities promptly or at reasonable prices. A restricted security that was liquid at the time of purchase may subsequently become illiquid.
The “net asset value” (NAV) of an ETF is determined at the close of each business day, and represents the dollar value of one share of the ETF; it is calculated by taking the total assets of an ETF subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as an ETF's intraday trading value. Investors should not expect to buy or sell shares at NAV. Total returns are based upon closing “market price” (price) of the ETF on the dates listed.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus which contain this and other information. Please read the prospectus and summary prospectus carefully before investing.
Van Eck Securities Corporation, Distributor
335 Madison Avenue, New York, NY 10017