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Van Eck Global - Since 1955

Unconstrained Emerging Markets Bond FundEMBCX

  • Daily Price   as of 04/24/2014

    NAV DAILY CHANGE
    $8.75  $0 / +0.0%
  • Class C Details: EMBCX

    INCEPTION DATE GROSS/NET EXPENSES1
    07/09/12 2.81/1.95%
  • Monthly Commentary: March 2014

    Angel Falls

     By: Eric Fine, Portfolio Manager  

    The Fund’s biggest winners in March were Argentina, Brazil, and Ivory Coast, all in hard-currency. The Fund’s biggest losers were small positions in Serbia, Russia, and Hungary that we hadn’t fully purged.  

    There are no changes in our basic stance. We continue to prefer hard-currency over local-currency, and want no investments with Ukraine-related risk. With respect to China and the prominent “dis-levering/growing less” narrative, all seems to be continuing as well. There have, therefore, been few changes in our portfolio. We’ll also spare you a long piece this month, as most of our points are repeats. The only new spin worth noting is perhaps that one could describe our portfolio as a barbell of high-yielders and low-yielders. Some would describe it as high-risk and low-risk, but we are uncomfortable with such terminology because anything in which we invest is based on our opinion that its risks are more than reflected in its price. Anyway, enough with the framing and polemics for the moment.

    Why hard-currency over local? First, real rates on local emerging markets (EM) bonds needed to be much higher when U.S. Treasury yields were higher. So if U.S. rates “normalize”, a greater real yield premium may be needed for EM local debt. If U.S. rates don’t rise due to weak final demand, then EM are probably in even more trouble, as they may weaken their currencies to compensate. Second, EM policymakers’ policy reactions tend to be growth negative, and typically involve some combination of weaker currencies and higher interest rates. This may protect reserves and the ability to repay hard-currency debt, but involve losses in local currency. Third, technicals are bad in local-currency. Because of lower relative growth rates, which tend to drive investment flows, flows into EM local-currency do not look set to change at this time. Because there has already been a lot of issuance in hard-currency debt, coupons and principal payments on hard-currency sovereign debt are equal to planned borrowing

    No Ukraine-related risk. Why you ask? First, this is not geopolitical analysis. We do not ask questions of U.S. or European or Russian policymakers. Nor are we reading a lot of U.S. popular media. This is Ukraine analysis that we’ve been doing for two decades and the analysis is that domestic Ukrainian politics are radicalizing and escalating.

    Read full March Commentary >> 

  • Video Viewpoint

    Global Research: Highlights from Eastern Europe

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "Even though large parts of the region benefit from growth recovery in the euro zone, especially Germany, there are two large economies, Russia and Turkey, where the growth dynamics remain extremely anemic."


    View now »


    Global Research: Poland

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "I think Poland is uniquely positioned to benefit from Germany's rebound... My key concern about Poland, however, is potential exposure to change in sentiment from political risks in Ukraine."


    View now »


    Global Research: Hungary

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "The shift in my outlook for Hungary has been fairly dramatic… the government, together with the central bank implemented fairly aggressive and large-scale funding for lending programs but I have yet to see the results in terms of stronger growth in Hungary."


    View now »


    Global Research: Turkey

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "The macroeconomic fundamentals in Turkey are getting worse. Turkey is vulnerable, but it’s always been vulnerable. It’s never had enough reserves. Its real interest rates have never been that satisfying. But the political context is the worst I’ve seen in twenty years."


    View now »


    Global Research: Romania

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "My outlook on Romania did not necessarily change for the negative but certain red flags were raised during my trip."


    View now »


    Global Research: Ukraine

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "The scenario of civil war and perhaps a civil war that has broader implications for the region is a scenario we have to think about. It's hard to assign probabilities to that, but the market seems to be saying it's a zero and I think zero is definitely the wrong answer."


    View now »


    How Will Tapering Affect EM Bonds?

    Eric Fine
    Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Fund


    “I don't have a blanket answer that says the taper is just not an issue for EM, but I do think it's been priced in generally. I think some countries have been able to react, and if tapering's happening because of good final demand, because economies are growing, then that's a high-quality problem for EM countries.”


    View now »


    Global Research: Indonesia, Malaysia, Philippines, and Vietnam

    Eric Fine
    Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Fund


    “A big attraction for Japanese and Korean investments in China is low wages. There are substantial and continuous wage pressures in China and that brings a big challenge for existing investments. The countries that I visited are all seeing substantial interest and in many cases are already seeing inflows from Japan.”


    View now »


    Why Unconstrained Approach to EM Bond Investing?

    Eric Fine
    Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Fund


    “In one word, the value of an unconstrained approach to emerging markets bond portfolio investing is ‘flexibility’. The market changed a lot in the past 20 years. At first, it was only hard currency bonds. Then came hard currency corporates followed by local currency sovereigns. Nowadays, local currency corporates are becoming more prominent. Having an unconstrained mandate is key to optimizing the portfolio using all four sub asset classes.”


    View now »


  • Emerging Opportunities

    Seedling

    Improvements in economic policies, strong balance sheets and improved creditworthiness of local governments continue to foster a strong case for investment in the emerging markets bonds.

     

      Emerging Market Bonds Defined 

     

    “Emerging Markets Hard Currency Bonds” are bonds denominated in foreign currencies that are generally widely accepted around the world (such as the US Dollar, Euro or Yen).

     

    “Emerging Markets Local Currency Bonds” are bonds denominated in the local currency of the issuer.  

     

    “Emerging Markets Sovereign Bonds” are bonds issued by national governments of emerging countries in order to finance a country's growth.  

     

    “Emerging Markets Quasi Sovereign Bonds” are bonds issued by corporations domiciled in emerging countries that are either 100% government owned or whose debts are 100% government guaranteed.  

     

    “Emerging Markets Corporate Bonds” are bonds issued by non-government owned corporations that are domiciled in emerging countries.

     

    Long term, an allocation to emerging markets bonds may provide diversification benefits as emerging markets fixed income tends to be less correlated to developed market fixed income.

  • Making the Investment Case

  • Important Disclosure 

    Unless otherwise stated, portfolio facts and statistics are shown for Class A shares; other classes may have different characteristics. 

    NAV: Unless you are eligible for a waiver, the public offering price you pay when you buy Class A shares of the Fund is the Net Asset Value (NAV) of the shares plus an initial sales charge. The initial sales charge varies depending upon the size of your purchase.  No sales charge is imposed where Class A or Class C shares are issued to you pursuant to the automatic investment of income dividends or capital gains distribution. It is the responsibility of the financial intermediary to ensure that the investor obtains the proper “breakpoint” discount. Class C, Class I and Class Y do not have an initial sales charge; however, Class C does charge a contingent deferred redemption charge.  See the prospectus and summary prospectus for more information.

    1Expenses are calculated for the 12-month period ending 12/31/13: Class A: Gross 1.67% and Net 1.25%; Class C: Gross 2.81% and Net 1.95%; Class I: Gross 1.03% and Net 0.95%; Class Y: Gross 1.74% and Net 1.00%. Expenses are capped contractually until 05/01/14 at 1.25% for Class A, 1.95% for Class C, 0.95% for Class I and 1.00% for Class Y. Caps exclude certain expenses, such as interest.

    2The J.P. Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM) tracks local currency bonds issued by Emerging Markets governments. The index spans over 15 countries. The J.P. Morgan Emerging Markets Bond Index Global Diversified (EMBI) tracks returns for actively traded external debt instruments in emerging markets, and is also J.P. Morgan’s most liquid U.S-dollar emerging markets debt benchmark.

    3Average Yield to Worst measures the lowest of either yield-to-maturity or yield-to-call date on every possible call date. Effective duration takes into account that expected cash flows will fluctuate as interest rates change. Effective maturity is the length of time until a fixed income investment returns its original investment. Distribution Yield is the amount of cash flow paid out and is calculated by dividing the annual income (interest or dividends) by the current price of the security. Averages are market weighted. These statistics do not take into account fees and expenses associated with investments or the Fund.

    The views and opinions expressed are those of Van Eck Global. Fund manager commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. Any discussion of specific securities mentioned in the commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary.

    You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to risks associated with its investments in emerging markets securities. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. As the Fund may invest in securities denominated in foreign currencies and some of the income received by the Fund will be in foreign currencies, changes in currency exchange rates may negatively impact the Fund’s return. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. The Fund may also be subject to credit risk, interest rate risk, sovereign debt risk, tax risk, non-diversification risk and risks associated with non-investment grade securities. Please see the prospectus and summary prospectus for information on these and other risk considerations. 

    Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. Bond and bond funds will decrease in value as interest rates rise. The prospectus and summary prospectus contain this and other information.  Please read them carefully before investing. 

    Not FDIC Insured — No Bank Guarantee — May Lose Value 

    Van Eck Securities Corporation, Distributor
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    New York, NY 10017
    800.826.2333