3X Emerging Market Bond ETF Debuts

Today Direxion Investments is rolling out an ETF that offers triple exposure to the J.P. Morgan Custom Emerging Markets Bond Index. The Direxion Daily Emerging Markets Bond Bull 3X Shares (EMBU) offers 300% exposure to its underlying index.

The fund is listed on the NYSE Arca and comes with an expense ratio of 1.07%.

EMBU’s underlying index covers USD-denominated external debt—that is, debt owed to foreign creditors—issued by sovereign and quasi-sovereign entities in emerging markets.

Among other requirements, components must have at least $1 billion in current face amount outstanding, be able to settle internationally through an institution such as Euroclear outside of its country of issuance and be actively traded.

Limit Methodology

The index can include both high-yield and investment-grade debt. The methodology limits the weight of countries with high levels of outstanding debt and overweights those with lower levels.

The index included 412 constituents as of the end of March, representing more than 50 countries, with Mexico, Indonesia, Russia, Turkey and Brazil representing the countries with the largest weightings.

Emerging market debt has been in focus for many investors in recent weeks, with experts torn on whether the space is overvalued or rife with opportunity. Currently, the largest ETF in the emerging market bond ETF space is the iShares JP Morgan USD Emerging Markets Bond ETF (EMB), with nearly $12 billion in assets under management.

Contact Heather Bell at [email protected]