Market Vectors’ international high-yield corporate bond portfolio manager Fran Rodilosso today commented on the supply and demand dynamics that have been at work in the emerging markets high yield corporate debt space since the start of the second quarter.
“Part of the performance story for emerging markets debt this year goes beyond the relatively strong underlying fundamentals,” noted Rodilosso. “Growing demand for investments outside of the U.S. and Eurozone has been met with supply interruptions mainly caused by fallout from the European debt crisis. The impact has been mainly on the high yield space, despite the solid performance of the secondary market.”
“While the first half of this year saw record-paced issuance from emerging markets companies, the second quarter witnessed less new supply, particularly from sub-investment grade borrowers,” continued Rodilosso. “High yield issuance in emerging markets in 2012 is, in fact, some $30 billion below where it was through the first seven months of 2011.”
Rodilosso also mentioned that he is beginning to see some new high yield issues come to market, even though late July is traditionally a slower time of year for new issuances. “I would expect any reasonably priced emerging markets high yield new issues to do very well in this environment,” he added.
Mr. Rodilosso, who joined the Market Vectors team earlier this year, has more than 20 years of senior level experience in emerging markets, high-yield debt research and portfolio management. He currently manages three Market Vectors high-yield corporate bond ETFs, Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL), International High Yield Bond ETF (NYSE Arca: IHY) and Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM).
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About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family currently totals $23.6 billion in assets under management, making it the fifth largest ETP family in the U.S. and eighth largest worldwide as of June 30, 2012.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and manages approximately $32 billion in investor assets as of June 30, 2012.
There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. The Funds' underlying securities may be subject to call risk, which may result in the Funds having to reinvest the proceeds at lower interest rates, resulting in a decline in the Funds' income.
The Funds, as they invest in high yield securities, may also be subject to a greater risk of loss of income and principal than higher rated securities. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability. The prices of high yield securities are likely to be more sensitive to adverse economic changes or individual issuer developments than higher rated securities. The secondary market for high yield securities may be less liquid than the market for higher quality securities and, as such, may have an adverse effect of market prices of certain securities. As the Fund may invest in securities denominated in foreign currencies and some of the income received by the Fund will be in foreign currency, changes in currency exchange rates may negatively impact the Fund’s return. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability. Investors should be willing to accept a high degree of volatility and the potential of significant loss. For a more complete description of these and other risks, please refer to the Fund’s prospectus and summary prospectus. The Fund may loan its securities, which may subject it to additional credit and counterparty risk.
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