Comparing SEMB to SEML
Introduction
The SMEL pays more and has a lower duration than SEML. However, is it less diversified and contains local curreny risk.
iShares J.P. Morgan $ EM Bond UCITS ETF – The Fund seeks to track the performance of an index composed of US Dollar denominated bonds from Emerging Market countries.
iShares J.P. Morgan EM Local Govt Bond UCITS ETF – The Fund seeks to track the performance of an index composed of local currency government bonds from Emerging Market countries.
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Comparison chart – (Feb 2018)
| type | semb | seml | difference |
| Total Expense Ratio | 0.45% | 0.50% | 0.05% |
| distribution freq | monthly | semi-annual | |
| Securities Lending Return | 0.03% | 0.01% | -0.02% |
| Use of Income | Distributing | Distributing | |
| Number of Holdings | 400 | 212 | -188 |
| Distribution Yield | 4.54% | 4.74% | 0.20% |
| Weighted Average YTM | 5.27% | 5.84% | 0.57% |
| Weighted Avg Maturity | 11.69 | 7.6 | -4.09 |
| Effective Duration | 7.27 | 5.05 | -2.22 |
Exposure Breakdowns
Exposure breakdown by country. SEML is concentrated to fewer countries with a higher % per country.
| SEMB | % | SEML | % |
| Mexico | 6.12 | Mexico | 10.06 |
| Indonesia | 4.91 | Poland | 9.96 |
| Turkey | 4.4 | Indonesia | 9.92 |
| Russian Federation | 4.38 | South Africa | 9.84 |
| Argentina | 4.06 | Thailand | 6.96 |
| China | 3.95 | Brazil | 6.78 |
| Philippines | 3.95 | Russian Federation | 6.71 |
| Brazil | 3.74 | Turkey | 6.28 |
| Colombia | 3.49 | Colombia | 6 |
| Ukraine | 3.23 | Malaysia | 5.3 |
| Ecuador | 3.23 | Hungary | 4.41 |
| Kazakhstan | 3.22 | Czech Republic | 3.91 |
| South Africa | 3.19 | Romania | 3.15 |
| Peru | 3.16 | Peru | 2.92 |
| Oman | 3.07 | Chile | 2.89 |
| Lebanon | 2.77 | Argentina | 1.66 |
| Dominican Republic | 2.75 | Cash and/or Derivatives | 3.26 |
| Hungary | 2.67 | ||
| Poland | 2.62 | ||
| Malaysia | 2.35 | ||
| Egypt | 2.32 | ||
| Uruguay | 2.2 | ||
| Panama | 1.78 | ||
| Sri Lanka | 1.7 | ||
| Chile | 1.69 | ||
| Croatia (Hrvatska) | 1.53 | ||
| Romania | 1.48 | ||
| Azerbaijan | 1.27 | ||
| Venezuela | 1.23 | ||
| Jamaica | 1.11 | ||
| Nigeria | 1.11 | ||
| Pakistan | 1.05 | ||
| Cash and/or Derivatives | 0.35 | ||
| Other | 9.93 |
Poland, Indonesia and South Africa constitute differences of > 5% in index weightings.
Thailand and Czech equst in SEML but not in SEMB.
The credit quality ratings of SEML are higher than SEMB. However, this is in part due to the fact that obligations only need to be met in the local currency for which the central bank can print it’s own currency saving a default at the expense of a currency devaluation. The denomination of all bonds in the SEMB index is USD.
Observations – Feb 2018
Total expense ratio (less the securities lending return) – SEML is more expensive to run. Generally speaking, 0.5% is among the highest charges for any iShares index so both indices are high with SEML being marginally more expensive than SEMB.
Number of Holdings – SEMB has considerably more holdings.
Distribution Yield – SEML pays more than SEMB.
Weighted Average YTM – SEML pays more than SEMB.
Weighted Avg Maturity – SEML has a lower average maturity than SEMB
Effective Duration – SEML has a lower duration than SEMB
Overall
On measuring the data it is observed that SEML is higher yield and lower duration than SEMB. The actual distribution yield of SEML is 0.20% higher than SEMB.
However, there is portfolio country risk due to the different index weightings and also currency risk (getting paid in local currency versus converting this payment at the prevailing FX rate to USD or another external currency.