ETF Showdown: Corporate Bonds The EM Way (EMCB, CEMB)
Despite a sluggish March, the pace of new ETF introductions remains fairly brisk in 2012 and it's BlackRock's (NYSE: BLK) iShares unit leading the charge. The world's largest ETF sponsor has rolled out roughly 40 new funds this year and plenty of bond funds have been included in that group.
Even with all the talk of a bond bubble, some of 2012's most successful new ETFs have been bond funds that offer investor investors international exposure.
Combine the aforementioned themes and we've got the makings of a great ETF Showdown between the newly minted WisdomTree Emerging Markets Corporate Bond ETF (Nasdaq: EMCB) and the even newer iShares Emerging Markets Corporate Bond Fund (BATS: CEMB).
To be fair, performance will not be one of the metrics used to judge these funds because when we say the iShares Emerging Markets Corporate Bond Fund is new, we mean it. It came to market on Thursday, thought that hasn't stopped the fund from accumulating $10 million in assets under management, according to the iShares Web site.
EMCB is by no means seasoned, having debuted on March 8, but in those six weeks of trading, the WisdomTree offering has hauled in over $60 million in AUM, making it one of the more successful new product launches of 2012.
In terms of expenses, both funds charge 0.6%, so that's not going to settle anything. CEMB is home to 74 holdings while EMCB is home to 30. Yield information isn't available yet for the iShares offering, but the 30-day SEC yield on EMCB is 4.73%, according to the WisdomTree Web site. Since the funds track different indexes and have a wide gap in terms of number of holdings, the potential exists for a significant yield difference as well.
CEMB's effective duration is 5.51 years and its yield to maturity is 4.88%. Those numbers for EMCB are 6.38 years and 5.34%.
In terms of holdings, the WisdomTree offering allocates about 68% of its weight to BBB and AA-rated issues with another 29% going to BB, B or below B bonds. All three are non-investment grade ratings. About 13% of CEMB's weight have junk status while another 13.2% aren't rated.
All told, the iShares offering offers exposure to 27 countries, according to the ETF's factsheet while EMCB is more narrowly focused on 14 countries. Brazil, Mexico Russia account for about 43% of CEMB's weight. That trio also dominates EMCB to the tune of 55%, but in this order: Brazil, Russia, Mexico.
At the end of the day, these funds appear similar, but investors should read the books and not just the titles. On the basis of almost 51% exposure to Latin America, a region that is primed for more credit upgrades in the coming years, we anoint the WisdomTree Emerging Markets Corporate Bond Fund as the winner of this week's ETF Showdown.
For more on emerging markets bond ETFs, please click HERE.
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