Exchange-traded fund (ETF) provider VanEck will expand its current range of ETFs with the launch of its first active ETF in Australia offering access to emerging market (EM) bonds.
The VanEck Emerging Income Opportunities Active ETF (Managed Fund) will be an Australian Securities Exchange (ASX)-listed, actively managed fund with a target yield of 5 per cent a year and monthly distributions, and a management cost of 0.95 per cent a year.
VanEck said the fund, which carries the ASX code EBND, was an ideal active option for investors seeking income as it would be transparent, liquid and should trade close to its net asset value due to it being open-ended.
VanEck managing director and head of Asia-Pacific Arian Neiron said: “With Australian and global developed markets’ bond yields extremely low, the higher yields available on emerging market debt provide investors with the potential for higher income. There is a new world order and emerging market bonds are at the forefront of this change.”
Neiron added the fund would have an unconstrained approach and consider the entire opportunity set within EM, while also being able to exploit the differences between countries, currencies, credit, duration, maturities and regions.
“EBND gives Australian investors that opportunity in, what we think is the best possible format, an Active ETF,” he said.
VanEck portfolio manager Eric Fine said the unconstrained approach would avoid any passive investments in large index components that could create exposure to excessively levered countries and companies.
“We think most investors do not have enough, or any, emerging markets bonds in their portfolios, despite emerging markets representing over 50 per cent of global GDP (gross domestic product),” Fine said.
“Many emerging markets boast strong economic performance and policy, while many developed markets are subject to political and economic risks without paying a premium. Investors with low or no exposure are potentially missing out on the diversification, yield and risk benefits associated with EM bond investing.”
Earlier this month, VanEck announced the release of a new ETF model portfolio using research from Lonsec and an annual return 2 per cent above the consumer price index.