VanEck JP Morgan EM Local Currency Bond ETF

EMLC

Market cap $3.8B

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.

Though the S&P 500 has recently returned to positive territory in terms of year-to-date (YTD) performance, turbulence throughout 2025 so far may have pushed skittish investors away from stocks and toward bonds.

Emerging market local currency bonds, such as EMLC, offer US investors a hedge against US dollar volatility. EMLC has a low correlation with most major asset classes, providing portfolio diversification and a positive yield of 6.1%. Emerging markets generally exhibit better deficit spending and debt leverage than the US, accompanied by higher GDP growth.

The greenback has been beaten-down this year, with some analysts expecting further lows.

Emerging-market (EM) local-currency bonds have outperformed their dollar-denominated peers in 2025, even as they offer yields lower than those of US Treasuries. The strong start to the year marks their best performance since 2022, thanks to growing expectations of rate cuts in developing nations and a cooling of global inflation.

Global equities ex-US are the leaders, along with a broad measure of commodities, based on a set of ETFs through Friday's close. Vanguard FTSE Developed Markets ETF has rallied 7.2% so far this year.

Domestic bond yields shot higher Wednesday following Election Day. That could give some fixed income investors pause about riskier corners of the global bond market.