Emerging markets debt investors bullish, BondBloxx recommends shorter duration approach.
Investors are becoming increasingly bullish on emerging markets debt this year, with a record $12.7 billion of capital being pumped into emerging market debt and equity funds in the week ending January 18th, 2021. BondBloxx Investment Management suggests investors seeking exposure to emerging markets debt consider a shorter duration approach to reduce interest rate and spread duration risk. The BondBloxx JP Morgan USD Emerging Markets 1-10 Year Bond ETF (XEMD) seeks to track the investment results of an index composed of short- to intermediate-term U.S. dollar-denominated, emerging market bonds.
XEMD’s index, the J.P. Morgan EMBI Global Diversified Liquid 1-10 Year Maturity Index, is shorter in duration than other broad market emerging market bond benchmarks, allowing for potential relative performance advantages during a rising rate environment. It is also roughly 2.75 years shorter than the J.P. Morgan Emerging Market Bond Index Global Diversified Index, and materially shorter than the Bloomberg US and Global Aggregate Indices, as well as the Bloomberg US Corporate Index.
BondBloxx was founded by ETF industry leaders in February 2022, and has since launched 19 fixed income ETFs, including the XEMD. These ETFs also include seven industry sector-specific high yield bond ETFs, three ratings-specific high yield bond ETFs, and eight target-duration U.S. Treasury ETFs. The company was created in order to provide precision ETF exposure for fixed income investors.
The emerging markets debt sector has been one of the worst-performing fixed income asset classes in 2022, but investors are becoming more bullish on the sector this year. BondBloxx Investment Management and BondBloxx JP Morgan USD Emerging Markets 1-10 Year Bond ETF (XEMD) are two viable options for fixed income investors looking to gain exposure to the sector. XEMD’s shorter duration approach allows for potential relative performance advantages during a rising rate environment, while the BondBloxx team has collectively built and launched over 350 ETFs at firms including BlackRock, JPMorgan, State Street, Northern Trust, and HSBC.