Read the Ingredients, Not Just the Name on the Label
By Francis G. Rodilosso, Senior Investment Officer, VanEck
Among the three major buckets in the Emerging Markets Aggregate Index – hard currency sovereign, local currency sovereign, and hard currency corporate – the most balanced exposure from a geographical perspective appears to be in the corporate space. The corporate index also includes a number of middle-eastern states that are not represented in the sovereign indices. Versus corporates, the sovereign indices have heavier concentrations in Eastern Europe and less exposure to Asia. These differences are much more acute in the case of hard currency sovereigns.
The advantages of adding corporates to a portfolio:
- added diversification by issuer, country, and region;
- increased exposure to higher growth Asian countries;
- higher yield and lower duration than sovereigns.
EM Local Currency Sovereign
EM Hard Currency Sovereign
EM Hard Currency Corporate
All data as of 29 Oct 2014 — Source: FactSet, MVIS
About the Author:
Francis G. Rodilosso, CFA (MBA ─ with distinction, Finance, The Wharton School, University of Pennsylvania; BA, History, Princeton University, 1990). Mr. Rodilosso serves as Senior Investment Officer and Portfolio Manager for various fixed-income exchange-traded funds (ETFs). Mr. Rodilosso previously held positions at the Seaport Group (Managing Director of Global Emerging Markets), Greylock Capital, Soundbrook Capital, Credit Lyonnais and HSBC.
The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.