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TheStreet Open House

Emerging Global Advisors Makes a Big Splash in Bond Funds

NEW YORK (TheStreet) -- One of the cornerstones of the entire ETF industry is the startup nature of the business especially among the smaller ETF providers. Innovation comes not just from the funds offered but also potentially from partnerships formed to offer new products. Out in front of what could be a wave of new alliances Emerging Global Advisors has partnered with TCW to bring the following suite of funds to the market;

  • EGShares TCW EM Short Term Investment Grade Bond ETF (SEMF)
  • EGShares TCW EM Intermediate Term Investment Grade Bond ETF (IEMF)
  • EGShares TCW EM Long Term Investment Grade Bond ETF (LEMF)

Quite obviously the funds provide access to emerging market, investment grade debt that is dollar denominated and investors can choose among the funds how far out they go on the yield curve.

While Emerging Global is well known to ETF investors the new funds represent TCW's first foray into ETFs. TCW is of course a huge management firm with $10 billion in emerging market debt alone and is the sub-advisor for all three funds.

All three funds track indexes from JPMorgan, own dollar denominated debt, charge a 0.65% expense ratio and are comprised of a combination of corporate debt, sovereign debt and quasi-sovereign debt which is debt not issued by a government but backed by the government. Emerging market debt is often denominated in U.S. dollars to make the bonds more appealing to investors.

They are all heaviest in corporate debt with SEMF at 64%, IEMF at 48% and LEMF at 44%.

The index underlying the short-term fund allocates 18% each to Brazil and Russia, 14% to Mexico and 10% in Turkey. It has 50 holdings, the effective duration is 1.82 years and weighted average yield to maturity is 1.65%.

Similarly, the index underlying the intermediate fund allocates 20% each to Brazil and Russia and 11% in Mexico. Both it and the long term fund each have 120 holdings. The effective duration for the intermediate fund is 4.64 years and its weighted average yield to maturity is 4.07%.

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