Van Eck Cuts EMLC’s Fee 4%; Still Cheapest

September 13, 2012

Van Eck cements EMLC’s status as the cheapest local currency emerging markets debt ETF.

Van Eck, the fund provider behind the Market Vectors ETFs, is cutting the price tag on its Market Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC) by 4 percent, effective immediately.

EMLC’s annual net expense ratio is now capped at 0.47 percent, from 0.49 percent previously, making the cheapest emerging markets bond ETF in the space even cheaper. The fund has gathered around $800 million since it came to market in mid-July 2010.

EMLC’s largest competitor, the $1.23 billion WisdomTree Emerging Markets Local Debt Fund (NYSEArca: ELD), has an annual expense ratio of 0.55 percent. The Van Eck fund also has a lower expense ratio than the $62 million the iShares Emerging Markets Local Currency Bond Fund (NYSEArca: LEMB), which costs 0.60 percent.

Local currency debt funds were all the rage when they first came out—dovetailing well with a longer-term dollar-weakening trend that only added to returns for U.S. investors. Coupled with the attractiveness of rapidly growing emerging markets, they were an easy sell.

“Low default rates among corporate bond issuers, investment grade credit ratings among most sovereign issuers in EMLC’s index and generally higher yields currently than comparable developed world issuers make a compelling case for investing in emerging market bonds,” Ed Lopez, Market Vectors’ marketing director, said in a press release.

That said, the emerging markets investing environment has grown decidedly less attractive in the past year, particularly given the slowdown in China. Moreover, the volatility in markets related largely to the eurozone’s ongoing debt crisis has brought the dollar’s role as a safe-haven currency back into sharp focus.

A quick look at our “Currency Impact Report,” which is based on comprehensive data from MSCI, makes the point all too clearly. Just look at all the red ink in the past 12 months in particular. That sea of red basically represents returns that are being taken off the table for U.S. investors by currency crosses that are favoring the dollar.

Van Eck also markets the Market Vectors Emerging Markets High Yield Bond ETF (NYSEArca: HYEM). It was rolled out in May of this year and has gathered $15.5 million, according to data compiled by IndexUniverse. HYEM has a net expense ratio of 0.40 percent.


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