Improving economic fundamentals may have made it appealing for investors to add exposure to Nigerian debt markets, according to Market Vectors’ fixed income portfolio managers Mike Mazier and Fran Rodilosso. They also noted that on Monday, October 1st, the underlying index for the Market Vectors Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC), which they manage, added exposure to three Nigerian bonds. This marks the first time the fund and its index will count Nigeria among its country exposures.
“I view this as a very significant development for EMLC and its index, since Nigeria is one of a handful of countries in sub-Sharan Africa that is well-positioned to offer significant opportunities to investors in the coming years as local capital markets continue to develop,” said Rodilosso.
“The Central Bank of Nigeria’s relaxation of restrictions on foreign investor participation in the bond market has allowed EMLC to hold local bonds with competitive yields,” added Mazier. “Nigeria now represents approximately 3% of EMLC’s overall exposure.”
Mazier also said that investments denominated in Nigerian naira, the country’s local currency, come with risks, including those from currency fluctuations, potentially destabilizing developments on the political front, and the fact that Nigeria’s economy is so closely tied to the oil markets.
“The risks are very real, but it is also worth noting that investors in EMLC will be gaining exposure to Nigeria through a diversified portfolio rather than taking a concentrated position,” he added. “The recent history of Nigeria and other borrowers from the region has shown a relatively low correlation with other parts of the Emerging Markets world, making this a potentially appealing addition to EMLC and its underlying index.”
Mr. Mazier and Mr. Rodilosso have more than 20 years of senior level experience in emerging markets, high-yield debt research and portfolio management. In addition to EMLC, they also manage six other Market Vectors taxable, fixed income ETFs: Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL), International High Yield Bond ETF (NYSE Arca: IHY), Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM), LatAm Aggregate Bond ETF (NYSE Arca: BONO), Renminbi Bond ETF (NYSE Arca: CHLC) and Investment Grade Floating Rate ETF (NYSE Arca: FLTR).
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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 $24.8 billion in assets under management, making it the fifth largest ETP family in the U.S. and eighth largest worldwide as of August 31, 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 $33.9 billion in investor assets as of August 31, 2012.
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