LEMB Joins Crowded Emerging Markets Local Currency Niche

October 29, 2011 by  
Filed under Commentary, ETF IPOs (New ETFs)

BlackRock launched iShares Emerging Markets Local Currency Bond Fund (LEMB) on October 20, 2011.  The new ETF specializes in publicly issued emerging market sovereign debt in the issuer’s local currency.  LEMB already quickly gathered more than $30 million in assets despite a crowded field of similar ETFs.

The underlying Barclays Capital Emerging Markets Broad Local Currency Bond Index is market value weighted and capped.  The fund’s sampling technique currently holds 44 of 289 index constituents.

Top country allocations are South Korea 20.6%, Brazil 13.7%, Mexico 6.9%, Poland 6.4%, and South Africa 4.5%.  LEMB  presently has an estimated 5.4% yield, an effective duration of 4.0 years, and a 0.60% expense ratio.  Additional information is located in the overview and fact sheet (pdf).

LEMB faces stiff competition from funds with higher yields and lower expenses.  SPDR Barclays Emerging Markets Local Bond (EBND) leads the category with its 6.0% yield and has an expense ratio of 0.50%.  Other competitors include Market Vectors Emerging Markets Local Currency Bond (EMLC) with a 5.3% yield and 0.49% expense ratio, and WisdomTree Emerging Markets Local Debt (ELD) with a 4.9% yield and 0.55% expense ratio.  The more narrowly focused WisdomTree Asia Local Debt Fund (ALD) yields 2.6% with a 0.55% expense ratio.

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.

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