EBND & EDIV: Two New SPDR Emerging Market ETFs
State Street Global Advisors on Thursday (2/24/11) rolled out two new ETFs targeting local currency bonds and dividend producing stocks of emerging market nations: SPDR Barclays Capital Emerging Markets Local Bond ETF (EBND) and SPDR S&P Emerging Markets Dividend ETF (EDIV).
SPDR Barclays Capital Emerging Markets Local Bond ETF (EBND)seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Barclays Capital EM Local Currency Government Diversified Index, an index that tracks the fixed-rate local currency sovereign debt of emerging market countries.
The underlying index has 365 holdings, a current yield of 6.5%, and a modified duration of 4.4 years. Largest country weightings include South Korea 12.2%, Brazil 12.2%, Poland 9.7%, Mexico 8.3%, Malaysia 6.2%, and Peru 5.2%.
EBND uses a sampling technique and presently holds just 84 bonds. If the sampling matches the index characteristics, then the ETF should yield about 6.0% after subtracting the 0.50% expense ratio. Additional details about the fund are in the EBND overview, fact sheet(pdf), and prospectus(pdf).
Competitors include the actively-managed WisdomTree Emerging Markets Local Debt Fund (ELD) and Market Vectors Emerging Markets Local Currency Bond ETF(EMLC). Being “local currency” bond funds, all three of these ETFs are subject to currency fluctuations as well as the inherent credit risk.
SPDR S&P Emerging Markets Dividend ETF (EDIV) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the S&P Emerging Markets Dividend Opportunities Index, an index that tracks dividend paying securities of publicly-traded companies in emerging markets.
The underlying index weights 100 stocks by annual dividend yield with single country exposure capped at 25%, sectors at 25%, and individual stocks at 3%. EDIV currently holds just 81 stocks and appears to be violating both the country and stock constraints of the index. Country weightings stand at 31.4% for Brazil, South Africa 13.6%, China 10.1%, Czech Republic 9.7%, Malaysia 6.8%, and South Korea 5.9%.
The five largest holdings are all above the 3% constraint with Redecard Sa 3.6%, Telefonica O2 Czec 3.3%, Cez 3.2%, Eletropaulo Metrop 3.2%, and Light S.A. 3.2%. The sector allocations are Utilities 12.7%, Telecommunications 9.1%, Financials 8.0%. Consumer Discretionary 7.0%, and Consumer Staples 5.4%.
Fund level dividend yield is not available at this time, but an index yield of 5.8% and an expense ratio of 0.59% should put the new ETF north of 5%. If achievable, this would be an extremely high yield for an equity fund. Additional details are located in the EDIV overview, fact sheet(pdf), and prospectus(pdf). Competitors include WisdomTree Emerging Markets Equity Income (DEM) (overview) and WisdomTree Emerging Markets Small Cap Dividend (DGS) (overview).
Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.