XTrackers USD Emerging Markets Bond UCITS ETF 2D

Issuer: Xtrackers

Asset Class: Fixed Income

TER: 25bps

Trading Currency: USD

Pays Income: False

Listing Date: 20 Jul 2018

Ticker: XUEM

ISIN: LU0677077884

This fund offers exposure to the emerging market debt asset class, which can serve as a potent portfolio diversifier and yield enhancer. Investing in bonds issued by governments and quasi-governmental entities from developing nations typically provides higher yields than debt from developed countries, compensating investors for the additional political, credit, and economic risks. These bonds can offer attractive returns, particularly in an environment where developed market interest rates are low. Including an allocation to this segment can potentially boost the overall income generation of a traditional fixed-income portfolio while adding a layer of geographic diversification.

Specifically, this investment vehicle tracks an index of U.S. dollar-denominated bonds from a wide range of emerging market countries. By focusing on debt issued in U.S. dollars, the fund helps to reduce the direct currency risk that would arise from holding bonds denominated in various local emerging market currencies. This feature can be particularly appealing for investors looking to isolate their exposure to the credit risk of emerging sovereigns without taking on additional foreign exchange volatility. The broad diversification across numerous issuers and countries within the underlying benchmark helps to mitigate the impact of adverse events in any single nation.

This type of product is most suitable for investors with a moderate-to-high risk tolerance who are seeking to augment their portfolio's yield. It can function as a strategic satellite holding to complement a core of lower-risk, developed market bonds. Given the inherent volatility associated with emerging markets, a long-term investment horizon is advisable, allowing investors to navigate potential short-term market fluctuations and capitalize on the long-term growth and income potential of these developing economies.