NEW YORK (TheStreet) -- Despite growing concerns over emerging markets, David Robbins, portfolio manager responsible for emerging market strategies at TCW, told TheStreet's Gregg Greenberg there is a way to safely play the asset class.
Robbins said the emerging markets asset class is very diversified, and its investment grade bonds are "very attractive" relative to U.S. investment grade fixed income.
He added that TCW has introduced the first duration-defined fixed income emerging market ETFs. The three new ETFs include: The EGShares TCW EM Short Term Investment Grade Bond ETF (SEMF), EGShares TCW EM Intermediate Term Investment Grade Bond ETF (IEMF), and EGShares TCW EM Long Term Investment Grade Bond ETF (LEMF).
The ETFs are based in U.S. dollars and are comprised of investment grade emerging market sovereign and corporate bonds, Robbins said. The biggest issuers in the ETFs by country are Brazil, Mexico and Russia -- which also happen to be the three largest investment-grade issuers in emerging markets.The SEMF yields are roughly 50 basis points higher than its U.S. equivalent, while the yields from the IEMF and LEMF are approximately 100 to 200 basis points higher than its U.S. equivalent. The ETFs have better yields than U.S. Treasury bonds, while emerging market investment grade assets have a 0% default rate over the past ten years, Robbins reminded investors.
He concluded that short-duration fixed income provides both a solid yield and duration-based safety against rising interest rates. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell