Weakness in Global X Emerging Markets Bond ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy receives a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in B rated bonds and an overweight in debt with five- to seven-year maturities compared with category peers. The strategy's portfolio management team has comparable experience to other strategies in the industry. However, due to other weaknesses, the strategy earns a Below Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

Global X Funds - Global X 1-3 Month T-Bill ETF

Morningstar's evaluation of this fund's process aims to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. Global X Emerging Markets Bond ETF earns a Low Process Pillar rating.    The predominant detractor from the rating is the parent firm's five-year retention rate of 67%, which suggests it could do more to hold onto its portfolio managers. The parent firm's five-year risk-adjusted success ratio of 28% also holds the process back. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup. The parent firm's inferior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.1 stars, detracts from the rating as well. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 Compared with other funds in the Emerging Markets Bond Morningstar Category, this fund consistently took on similar credit risk over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Relative to the average strategy in the category, the managers have been underweight B rated bonds in recent years. In the latest month, the strategy has also relatively underweighted B rated bonds compared with Morningstar Category peers. Additionally, there's been a bias towards debt with five- to seven-year maturities over the past few years. Compared with category peers, however, the strategy had less debt with five- to seven-year maturities exposure in the latest month. Finally, during the past few years, the fund leaned towards government bonds. In this month, the strategy also leaned more towards government bonds compared with its peers.

 This strategy's 12-month yield is 5.4%, lower than its average peers' 5.9%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 6.1%. A lower yield tends to indicate lower credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated BB.

Process

Global X Emerging Markets Bond ETF earns a Below Average People Pillar rating. The team benefits from the strategy's fees, which rank in its category's cheapest fifth. A higher expense ratio reduces net returns, so low costs give this team an advantage. However, the rating is weakened by the turnover of management across its parent firm. The firm's asset-weighted manager tenure of six years suggests it could do more to retain portfolio managers. The parent firm's subpar risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.1 stars, also holds the team back. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.


Joon Hyuk Heo, the longest-tenured manager on the strategy, provides strong guidance, offering 12 years of listed portfolio management experience. The average Morningstar Rating of the strategies they manage is 3.8 stars, demonstrating above-average risk-adjusted performance versus category peers. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

Below Average

People

Mirae Asset Global Investments is a Korean asset manager and a key player in the Asian financial market. It is a wholly owned subsidiary of Mirae Asset Financial Group, founded by Hyeon Joo Park. Park’s leadership and entrepreneurial spirit have been the driving force behind the global rise of Mirae, and he holds a majority stake in the business. 
Mirae Asset has grown significantly over the years (USD 198 billion as of December 2022) across a diversified platform, of which about 60% of assets are managed in South Korea. We believe that Mirae’s core mutual fund business in the Asia-Pac region is relatively strong. It has a collaborative structure, a strong and large investment team, low manager turnover, competitive fees, and a disciplined approach to product-development pointing toward better stewardship practices relative to peers in these markets. However, this is in stark contrast to its exchange-traded fund business, which accounts for 41% of the total assets. 
The firm’s ETF lineup focuses largely on high-risk thematic strategies that seem gimmicky, emphasizing short-term asset-gathering. The firm appears to leverage trending topics such as robotics and artificial intelligence, virtual reality and gaming, and cloud computing. There’s a notable concern regarding the potential liquidation of these funds since they seem to be designed around investment fads. Furthermore, these products are often expensive, especially compared with broadly diversified index funds and ETFs. Unsurprisingly, Mirae's reflexive product-development strategy has led to an increase in fund closures.
Our experience engaging with the MAGI team to gather critical information for the parent assessment has not been as positive. It hasn’t been as transparent in its disclosures, and unlike its peers, its responsiveness has been inadequate. We prefer firms with a more transparent corporate culture. Overall, these actions hold us back, and the firm retains its Parent Pillar rating of Average.

Average

Parent

Global X Emerging Markets Bond ETF 

EMBD is actively managed to invest in broad emerging market bonds with any maturity.

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A strong dollar amid rising interest rates have soured the taste for risk in emerging markets (EM) for most of the year, but signs of life could be emerging based on EM bond inflows. Bonds in Asian countries like India and Thailand are signaling that foreign investors could be re-thinking EM bond exposure.

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In emerging markets valuations look attractive today after the losses across financial markets early this year. PIMCO's investment process is founded upon our macroeconomic outlook and our in-house country and credit research.

Spotting Opportunities And Risks Across The EM Investment Universe

Heading into 2022, the macro backdrop for risk-assets was already facing challenges from the expected slowdown in global growth, due to the resurgence of the Omicron variant and persistent inflationary dynamics. In the first quarter of 2022, Russia's full-scale invasion of Ukraine put further pressure on risk assets as well as inflation dynamics.

Emerging Markets Bond ETF: Q1 2022 Commentary

Emerging markets (EM) have had a rough outing amid the pandemic, a rising U.S. dollar, global inflation, and now Russia's invasion of Ukraine. However, should EM roar back in a big way, its bonds could also get a boost.

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As for the emerging markets, macro headwinds persisted as Chinese economic growth decelerated due to policymakers' deleveraging policies.

Emerging Markets Bond ETF (EMBD): Q4 2021 Commentary

While the MSCI Emerging Markets Index is down 5% in 2021, the bonds for EM have actually fared much better in the past year. “Emerging-market bonds were supposed to be dragged down this year as central banks moved toward withdrawing stimulus.

Emerging Market Bonds Fared Better Than Expected in 2021

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Performance of emerging markets local currency bonds has been negatively impacted by the U.S. dollar's strength since mid-year, despite the higher real yields and upside growth surprises in many emerging markets. Currency returns can be volatile, and external factors can have a bigger short-term impact on an emerging markets currency (EMFX) even if relatively attractive fundamentals may provide longer-term support.

Technical Tailwinds May Lift EMFX

It appears that active bond funds have been actively outperforming their stock market peers, according to data from Morningstar. “Around 84% of active bond fund managers outperformed in the one-year period that ended on June 30, 2021 versus just 47% of active equity fund managers, a semiannual Morningstar report found,” reports CNBC.

Active Bond Funds Outperformed Stocks in One-Year Period

During Q3 2021, the Global X Emerging Markets Bond ETF (EMBD) recorded a total return of -0.56%. Despite the loss, this compares favorably to the -0.82% returns for the fund's benchmark, JP Morgan EMBI Global Core Index, over the same period.

Emerging Markets Bond ETF (EMBD): Q3 2021 Commentary

We have seen a sharp growth in the issuance of not only green bonds but also sustainability bonds and social bonds, which are closely related. When thinking about issuance outside of the corporate space, sovereigns and state-owned enterprises in Latin America are leading in that respect, with Asia closely following.

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During Q2 2021, EMBD posted a total return of +3.10%. This compares to a gain of +4.49% for the JP Morgan EMBI Global Core Index, the fund's benchmark, over the same period. During the quarter, EMBD underperformed its benchmark by 139 basis points. EMBD's lower duration relative to the index was a main detractor to performance as US treasuries rallied during the period.

Emerging Markets Bond ETF (EMBD): Q2 2021 Commentary

While emerging markets offer exciting opportunities, they also pose challenges that are significant and entangled. This is particularly relevant for investors in EM corporate bonds. Over the last few years, the emerging market corporate bond sector has grown enormously and generated compelling risk-adjusted returns.

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Fixed income investors willing to venture toward the riskier side of the yield curve can do so with emerging markets (EM) bonds. They can opt to have these bonds handpicked by a pro with the actively managed Global X Emerging Markets Bond ETF (EMBD).

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Emerging markets offer attractive alternatives to fixed income investors searching for yield amid the trillions of dollars of negative-, zero-, and low-yielding debt globally. Within emerging market hard currency investment grade bonds, we think it is prudent to be shorter duration or at least hedge the Treasury risk component, given the low yield per unit of duration today.

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An investing spike in special purpose acquisition companies (SPACs) is spilling over into high yield. One asset to consider is the actively managed Global X Emerging Markets Bond ETF (EMBD).

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For the period December 31, 2020 to March 31, 2021, the Global X Emerging Markets Bond ETF (EMBD), sub-advised and actively managed by Mirae Asset Global Investments (USA) LLC, posted a loss of -3.95% (including dividends). During Q1 2021, the Fund outperformed its benchmark by +133 basis points. EMBD's lower duration relative to its benchmark was the main contributor to outperformance.

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Fixed income investors who want to satiate their appetites for yield can opt for emerging markets (EM) using an actively managed strategy with ETFs like the Global X Emerging Markets Bond ETF (EMBD). EMBD aims to provide investors with strategic exposure to the growing universe of emerging market debt.

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A passive index may not give fixed income investors full exposure to the broad spectrum of bonds, including those in emerging markets. Thankfully, there's a solution for that problem in the actively managed Global X Emerging Markets Bond ETF (EMBD).

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During Q4 2020, the Fund outperformed the Index by +131 basis points. Global growth continued to recover from the second quarter lows on the back of large monetary and fiscal stimulus.

Emerging Market Bond ETF (EMBD): Q4 2020 Commentary

During Q3, the actively managed Global X Emerging Markets Bond ETF (EMBD) outperformed its benchmark, the JPMorgan EMBI Global Core Index, by 72 basis points, primarily due to security selection of corporate issuers. EMBD's overweight positions and security selection in corporate issuers within Brazil's pulp paper sector positively contributed to relative performance.

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Emerging markets bonds are a prime example of an asset class where active management can serve investors well. Those investors now have more options thanks to the recent arrival of the Global X Emerging Markets Bond ETF (EMBD).

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