VanEck Emerging Markets High Yield Bond ETF

HYEM

Börsenwert 510 Mio. $

The VanEck Emerging Markets High-Yield Bond ETF offers a 30-day SEC yield near 7% and a YTW of 7.30%, but current spread levels below 300 basis points, in my opinion, limit near-term upside. Over half of HYEM's portfolio sits in cyclical sectors like financials, energy, and basic materials, tying returns closely to commodity trends. With a duration near 3.5 years, HYEM's price reacts more to credit spread swings than to shifts in US interest rates.

Diversifying into foreign bond markets has been a win for US investors this year, based on a review of a set of ETFs through Aug. 27's close. The Vanguard Total Bond Market ETF, a proxy for government and investment‑grade corporates, is essentially flat, posting a fractional 0.2% rise.

Many investors need more than traditional bonds can deliver. VanEck provides access to a range of higher-yielding asset classes built for today's income environment.

Emerging market bonds offered some of the highest dividend yields in prior years. Returns were quite good too. Conditions for these securities have worsened, leading to comparatively weaker dividend yields and expected returns. HYEM is a high-yield emerging market bond ETF, negatively impacted by these trends.

At the same time developed markets have been generating policy and macro noise, emerging markets have been quietly outperforming. The inextricable relationship between the direction of U.S. monetary policy and emerging market risk assets remains powerful, but this time the rally is not just about the Fed.

Echoing the strong run in foreign equities in 2025, bond markets ex-US are also having a good year. Using a set of ETFs to track the major international buckets of fixed-income securities shows across-the-board outperformance over a popular US benchmark through Wednesday's close (Dec. 17).

HYEM offers a 7% yield based on dollar-denominated sub investment grade bonds from emerging markets. HYEM is diversified in countries and sectors, with a focus on Latin America and financials. The fund's value and distributions have steadily declined, resulting in significant inflation-adjusted losses over the past decade.

HYEM has a 0.40% expense ratio, 405 bonds, strong exposure to China, and BBB-CCC rated debt with a duration under 5 years. The spread between emerging market high-yield and investment-grade bond yields has narrowed to concerning lows. The threat of tariffs could lead to rising yields, which would push prices down.

Below-investment-grade bonds issued by companies in emerging markets are outperforming by a wide margin in 2024, based on a set of ETFs. HYEM's rally is also adding to leading the rally in US-based junk bonds.

Risk-tolerant investors searching for income and the potential for added upside with bonds have long turned to high-yield corporate debt and related ETFs. However, that focus has largely been limited to domestic offerings.