VanEck JP Morgan EM Local Currency Bond ETF

EMLC

Market cap $5.17B

Today's market environment is pushing investors to look beyond traditional fixed income for higher yield. VanEck's income-focused ETFs provide access across asset classes.

Normalizing yield curves, easing monetary policy in the U.S., and a weakening dollar are just a few macro factors that hit the bond markets in 2025. The latter carved a path for emerging market (EM) bond strength last year, giving them the “wow” factor relative to their fixed income peers.

The VanEck J.P. Morgan EM Local Currency Bond ETF receives a "Sell" rating for long-term investors due to steady capital decay and currency risk. EMLC offers broad emerging market sovereign debt exposure with moderate credit and interest rate risk. Despite outperforming developed market bond benchmarks, EMLC has underperformed inflation and suffered a 48% price decline since inception.

Prices for raw materials have rocketed higher so far this year, outperforming the rest of the major asset classes by a wide margin through Friday's close (Jan. 23), based on a set of ETFs.

EMB and other EM bond ETFs are gaining favor as investors seek yield and insulation from US-EU trade tensions tied to the Greenland dispute.

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).

VanEck has consistently delivered some of the best funds that help investors diversify into untapped and new markets.

When it comes to equities exposure, U.S. large-caps continue to garner the lion's share of capital allocations. However, emerging markets (EM) could finally be in the throes of a comeback.

EMLC is attractive now due to a weakening dollar, which boosts returns for local currency EM debt and supports positive fund performance. The ETF is best used tactically when global rates are falling and the dollar is weak, not as a long-term buy-and-hold investment. EMLC offers diversification benefits, with a low correlation to U.S. credit risk and a shallow drawdown profile compared to hard currency EM debt.

Emerging market local currency bonds, as represented by VanEck J.P. Morgan EM Local Currency Bond ETF, have delivered poor returns over the past decade, underperforming both developed market bonds and EM equities. The yield spread between EM bonds and developed market bonds seems too narrow to justify the higher risk level. The nature of the asset class means that when individual EM countries run into trouble, it can have an outsized negative impact on returns.