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Bloomberg ETF IQ Drilling Down Into ANGL


SCARLET FU: I'm Scarlet Fu. Welcome to Bloomberg ETF IQ. For every ETF that offers exposure to an asset class or style, it's not long before others promise the same. Joining us now is Jan van Eck of VanEck. Before we speak to him though, Eric is back to gives us the drill down into one of his funds, ANGL.


ERIC BALCHUNAS: Thank you, Scarlet. Yes, we call it ANG[e]L, but it's VanEck Vectors Fallen Angel High Yield Bond ETF, and it's definitely a rising star in the ETF world. You can see here it's got about a billion dollars. That's up from about 50 million only a couple of years ago. So a lot of assets are going into this. It’s 35 basis points, which is about average, a little below for a high yield debt ETF.


What does it hold? This is basically tracking bonds that were recently downgraded from investment grade to high yield, so sort of a bond purgatory, if you will, and that's the double-B area here. Triple B is investment grade. They get downgraded. This thing comes in, scoops them up, and it rebalances monthly, and that's important because a lot of times, these bonds, they get downgraded are oversold because there's way more assets in investment grade than there is in high yield. So this is trying to pick them up before they come back to their justified fundamental levels, almost like a value factor in debt.


Is it working? Well, let's look at the returns of this ETF versus HYG [iShares iBoxx $ High Yid Corp Bond ETF], which is high yield debt and LQD [iShares iBoxx $ Investment Grade Corporate Bond ETF] and, I mean, it is killing it. Basically it's doubling both of those ETFs. It is quite something. The duration is a little interesting. This is a little more duration than HYG, so you got rate risk. But other than that, you got to give it a lot of credit for outperforming these two at such a level. And so this purgatory, Scarlet, is producing some heavenly returns.


FU: Nice one. Eric Balchunas, thank you so much. Let's bring back in Jan van Eck. So Jan, ANGL, when you look at the returns, it looks too good to be true. I feel like there needs to be a catch somewhere here.


JAN VAN ECK: Well the risk with any sort of rules-based trading strategy is that too many people start doing it. That to me is the biggest risk. Secondly, what you want is a sector that really goes out of favor. You want a lot of bonds falling out of investment grade into high yield. You don't really have that now.


What you see on that chart was 2016 when energy fell apart. And so in the first quarter, a lot of energy bonds were coming into the index. We were buying them. People were hating energy. Remember energy, I cannot remember how low it went. And one of the structures of the fund is that there's no cap per sector. So we were buying a lot of energy that maybe no normal active fund manager would have been doing.


FU: So in the next six months to a year, what sector do you think will be over represented?


VAN ECK: I'm not sure. I mean, what you have is some of the holdovers, so energy is the largest weighting now, and then you have industrials and materials as the second largest, and some telecom names. So there isn't a big crisis right now.


BALCHUNAS: So Jan, I was looking through your ETFs. I was shocked at the one that's taken in the most flows over the last several periods. EMLC. It's not GDX, it's EMLC, emerging markets local currency. What's going on here? What does this do and why is it so popular in the past couple of years?


VAN ECK: Well a couple of keys, number one, people are always looking for yield. And our view and I guess the view of a lot of people is that we're in a rising rate environment. So the Fed started reducing quantitative easing two years ago. And I think it's really clear. We have a 2016 to 2020, we've got four years of rising interest rates. Why do I say that? Because the U.S. has already started and they're going this year. Europe is about two years delayed. So after the U.S., no matter what we keep doing, it's going to continue. People don't want to be in that game, so they want alternatives. That's why they go to the emerging markets.


FU: I also see GDXJ up there, junior gold miners. Walk us through how this became such a big hit and whether that formula could be replicable with other ETFs.


VAN ECK: Well what GDX and GDXJ gave investors, people love to bet on gold and gold shares. It gave them a super liquid way of accessing them, because resource shares, individually in gold mining companies as well can be quite illiquid. And this was just a great way to enter and exit the space. What you had at the same time was some leveraged funds, not run by VanEck, but leveraged ETFs that invested into our ETFs or those exposures. And so you saw a lot of flows because of that, a year ago.


BALCHUNAS: Now you guys were one of the first firms to file for a bitcoin futures ETF. You filed it, withdrew it after the triple leverage got filed. Then the SEC came out with this 31 questions letter. That seemed to just pour cold water on the whole thing. Where do we stand with the prospects of a bitcoin ETF and even beyond that into other cryptos?


VAN ECK: Well I think obviously, I think it's going to be slow moving, but there's really two problems. One is, what's the right price? If you have to value a fund at 4:00, what's the right price of bitcoin. And because the market is so fragmented, you have to kind of solve that problem. We think we've solved it through our indices, but that's a discussion to have with the regulators.


The second issue is custody. Now that's not a problem for futures contracts. There what the regulators care about is the low volume. There's only a hundred million or so outstanding in the futures contracts. That's way not enough if you have an ETF and you get a lot of flows. So that's what the regulators are rightly concerned about.


FU: Very quickly, do you see momentum or interest from investors dropping off a bit with cryptos kind of coming off the front page a little bit?


VAN ECK: You know, you think you would see that and I just count the whole melt-up in December, so I look at, okay, 10,000. And it's, for bitcoin, not really down from there, but I think there has been a lot of selling. But I was just at a conference and they had four speakers, they were all raving crypto. I mean, they were changing their whole careers to go crypto.


FU: All right, I guess that says it all. Jan, thank you so much.


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IMPORTANT DISCLOSURES


VanEck Vectors® Fallen Angel High Yield Bond ETF (ANGL®) Average Annual Returns


As of 12/31/2017


  1 YR 5 YR Since Inception 04/10/12
ANGL (NAV) 9.67% 8.45% 9.35%
ANGL (Share Price) 9.73% 8.46% 9.40%
H0FA (Index) 10.40% 9.50% 10.76%

 


VanEck Vectors® J.P. Morgan EM Local Currency Bond ETF (EMLC®) Average Annual Returns


As of 12/31/2017


  1 YR 5 YR Since Inception 07/22/10
EMLC (NAV) 14.00% -1.87% 1.26%
EMLC (Share Price) 13.85% -2.08% 1.27%
GBIEMCOR (Index) 14.66% -1.24% 2.10%

VanEck Vectors® Gold Miners ETF (GDX®) Average Annual Returns


As of 12/31/2017


  1 YR 5 YR 10 YR
GDX (NAV) 11.99% -12.77% -6.04%
GDX (Share Price) 11.94% -12.30% -3.88%
GDMNTR (Index) 12.21% -11.88% -3.40%

VanEck Vectors® Junior Gold Miners ETF (GDXJ®) Average Annual Returns


As of 12/31/2017


  1 YR 5 YR Since Inception 11/10/09
GDXJ (NAV) 7.89% -14.31% -9.62%
GDXJ (Share Price) 8.21% -14.35% -9.65%
MVGDXJTR (Index) 6.19% -14.21% -9.42%

Performance data quoted represents past performance which is no guarantee of future results and which may be lower or higher than current performance. Investment returns and ETF share values will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. ETF returns assume that dividends and capital gains distributions have been reinvested in the Fund at "Net Asset Value" (NAV). The NAV of a VanEck Vectors Exchange Traded Fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF's intraday trading value. VanEck Vectors ETF investors should not expect to buy or sell shares at NAV. Performance current to the most recent month-end is available by calling 800.826.2333 or by visiting vaneck.com.


This content is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this content. Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.


The information herein represents the opinion of the speaker(s), but not necessarily those of VanEck, and these opinions may change at any time and from time to time. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Historical performance is not indicative of future results. Current data may differ from data quoted. Any graphs shown herein are for illustrative purposes only. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.


An investment in VanEck Vectors® Fallen Angel High Yield Bond ETF (ANGL®) may be subject to risk which include, among others, credit risk, call risk, and interest rate risk, all of which may adversely affect ANGL. High yield bonds may be subject to greater risk of loss of income and principal and are likely to be more sensitive to adverse economic changes than higher rated securities. International investing involves additional risks which include greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity and political instability. ANGL's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors. ICE Data Indices, LLC and its affiliates (“ICE Data”) indices and related information, the name "ICE Data", and related trademarks, are intellectual property licensed from ICE Data, and may not be copied, used, or distributed without ICE Data's prior written approval. The licensee's products have not been passed on as to their legality or suitability, and are not regulated, issued, endorsed, sold, guaranteed, or promoted by ICE Data. ICE DATA MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE INDICES, ANY RELATED INFORMATION, ITS TRADEMARKS, OR THE PRODUCT(S) (INCLUDING WITHOUT LIMITATION, THEIR QUALITY, ACCURACY, SUITABILITY AND/OR COMPLETENESS).


ICE BofAML US Fallen Angel High Yield Index (H0FA), formerly known as BofAML US Fallen Angel High Yield Index prior to 10/23/2017, is comprised of below investment grade corporate bonds denominated in U.S. dollars, issued in the U.S. domestic market and that were rated investment grade at the time of issuance.


An investment in VanEck Vectors® J.P. Morgan EM Local Currency Bond ETF (EMLC®) may be subject to risks which include, among others, credit risk, call risk, interest rate risk, and sovereign defaults, all of which may adversely affect EMLC. High yield bonds may be subject to greater risk of loss of income and principal and are likely to be more sensitive to adverse economic changes than higher rated securities. International investing involves additional risks which include greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity and political instability. Changes in currency exchange rates may negatively impact the EMLC's return. Investments in emerging markets 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. EMLC's assets may be concentrated in a particular sector or region and may be subject to more risk than investments in a diverse group of sectors or regions.


J.P. Morgan GBI-EMG Core Index (GBIEMCOR) is comprised of bonds issued by emerging markets governments and denominated in the local currency of the issuer. 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. © 2018. JPMorgan Chase & Co. All rights reserved.


An investment in VanEck Vectors® Gold Miners ETF (GDX®) and VanEck Vectors® Junior Gold Miners ETF (GDXJ®) may be subject to risks which include, among others, investing in gold and silver mining companies, Canadian issuers, foreign securities, currency, depositary receipts, small-and medium-capitalization companies, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, replication management risk, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified and concentration risks, all of which may adversely affect GDX and GDXJ. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact GDX and GDXJ’s returns. Small- and medium-capitalization companies may be subject to elevated risks. GDX and GDXJ's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.


NYSE Arca Gold Miners Index (GDMNTR) is intended to track the overall performance of companies involved in the gold mining industry. MVIS® Global Junior Gold Miners Index (MVGDXJTR) is intended to track the overall performance of small-capitalization companies that are involved primarily in the mining for gold and/or silver.


Fund shares are not individually redeemable and will be issued and redeemed at their net asset value (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. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results.


Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will generally decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.


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