"EMLC holds government bonds issued by emerging market countries in their own currencies, such as Brazilian reals, Indonesian rupiah, and Mexican pesos. Each month, EMLC passes interest income to shareholders as a distribution. Recent monthly payments have ranged from $0.1149 to $0.1390 per share, and the fund has made 161 consecutive monthly payments since its July 2010 inception with no gaps or suspensions."
"EMLC is fundamentally a bet on emerging market currencies holding their value against the U.S. dollar. When the dollar strengthens, the value of those local currency interest payments shrinks in dollar terms, and so does the effective yield. One analyst describes EMLC as "more of a bet against the U.S. dollar" than a traditional bond fund."
"Over the past year, EMLC has delivered a 13.2% total return, which is strong for a bond fund. Zoom out and the picture sobers: the 10-year price return is just 28.22%, meaning the share price itself has contributed very little after a decade. Most of the return came from distributions."
EMLC, a VanEck J.P. Morgan emerging market local currency bond ETF, attracts income-seeking retirees with a 5.75% dividend yield compared to the 10-year Treasury's 4.13%. The fund holds government bonds issued in emerging market currencies like Brazilian reals, Indonesian rupiah, and Mexican pesos, distributing monthly interest payments with a 161-month consecutive payment history. However, the yield advantage masks substantial currency risk. EMLC functions primarily as a bet against U.S. dollar strength; when the dollar strengthens, foreign currency interest payments decline in dollar value. Over ten years, the fund shows only 28.22% price appreciation despite consistent distributions, indicating significant capital decay and limited long-term growth potential.
Read at 24/7 Wall St.
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