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Diversification – VanEck Emerging income Opportunities Active ETF (EBND)

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Question asked 27/06/2025

Diversification – VanEck Emerging income Opportunities Active ETF (EBND)

Hi Guys, Thanks for your continued helpful advice. I'm reading Ray Dalio's book "How Countries Go Broke". He's been talking about the rise of China, US debt etc, for several years now. Ray's macro view of investing now, a time of changing world order, is "diversify well" and stick with the countries that get fundamentals right. Fundamentals like education, a strong national income and balance sheet, greater earnings vs spending, internal order, low risk of being at war, low risk of harmful acts of nature and those that benefit most from changes in technology. Coincidentally, I recently participated in a Van Eck webinar promoting their ETF EBND. It invests in emerging market bonds and pays monthly. I was surprised to discover that that recent years have seen Emerging Markets countries appear to fit many of the financial fundamentals Ray Dalio mentioned whereas Developed Markets have generally become a riskier, less attractive alternative because of high debt. What do you think of this ETF? A good diversifier? Is it a contender for your income portfolio? Cheers, Nick

Answer

Hi Nick,

Rays book is a good read although his time horizons are very long term in nature. Moving onto the abovementioned VanEck EBND ETF:

The ETF diversifies risk across ~100 holdings of bonds in emerging markets – note the currency exposure is unhedged.
From a geographic perspective its current largest exposures are Malaysia 6.5%, Thailand 6.1%, South Africa 6%, Brazil 5.8% and Poland 4.8%.
From an industry perspective it holds 83% in sovereign bonds, 6.6% in Oil & Gas, 1.2% in Electric and 1.1% in Real Estate.
The cost of the ETF is 0.95% pa which we think is ok considering the asset class.

The key benefit, which of course comes with risks, is emerging market bonds generally pay higher interest than developed markets bonds offering investors an opportunity to broaden their income horizon while receiving a higher yield:

Over the last 5-years the Total Return has been 6.59% but its really started to outperform in the last 1 and 3-years delivering 8.36% and 7.1% respectively.

As the $US falls out of favour as the global reserve currency the EBND is well positioned to continue its strong performance over the last few years.

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VanEck Emerging income Opportunities Active ETF (EBND)

LAST UPDATED 26/06/2025 13:21

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