FEMB vs LEMB

FEMBCFirst Trust Emerging Markets Local Currency Bond ETF

LEMBAiShares J.P. Morgan EM Local Currency Bond ETF

In short

FEMB Emerging-market debt bought in the borrower's own money, not dollars, and picked by a manager rather than an index. At least 80% of assets sit in local-currency bonds, so the currency move counts alongside the coupon. Pays monthly.

LEMB Most emerging-markets funds buy stocks. LEMB buys government bonds priced in pesos, rand and rupiah, so the ride comes from local interest rates and the currency, not the dollar. iShares has run this unhedged EM debt sleeve since 2011.

Stated mandate

FEMB The Fund seeks maximum total return and current income.

LEMB The fund seeks to track an index of sovereign bonds issued by emerging-market countries in their local currencies.

Why people hold it

• FEMB Actively managed, so the team chooses which countries, curves and currencies to own instead of inheriting an index weighting. First Trust has run it this way since 2014.ftportfolios.com
• The mandate is specific: at least 80% of assets in bonds, notes and bills from emerging-market issuers, denominated in the issuer's local currency. The FX exposure is the point, not a side effect.ftportfolios.com
• Stated goal is maximum total return and current income, and the fund distributes monthly rather than quarterly.
• For a corner of the market this specialized, it holds up on the plumbing: hundreds of millions in assets and steady day-to-day trading.

• LEMB Sovereign debt in local currency, not dollars: you hold the borrowing rates and the currencies of emerging economies directly.ishares.com
• 0.30% expense ratio, below the median for the emerging-markets funds we track.
• The J.P. Morgan index it follows caps any one country at 15% and floors smaller ones at 4%, spreading roughly 400 bonds across many issuers instead of two or three giants.ishares.com
• Trading since 2011, one of the longest-running US listings in this corner of the bond market, and it scores in the upper half of its peer group overall.

Worth knowing

• FEMB At 0.85% a year, it sits well above what a typical emerging-market ETF charges. Active management in local-currency debt is the reason, but the fee is a real headwind on income.
• Currency cuts both ways here. Local-currency bonds mean dollar strength can offset coupon income and dollar weakness can add to returns. Nothing is hedged away.ftportfolios.com
• Concentrated book of roughly 60 bonds, so individual country and currency calls carry weight, and there is no published index to measure the manager against.

• LEMB No currency hedge. Local yields can be healthy and still be swamped by a strong dollar, so day-to-day moves often look more like FX than bonds.ishares.com
• Government issuers only. This is a rates-and-currency vehicle, not a play on emerging-market companies or credit spreads.
• Income arrives on an annual or semiannual schedule, and the fund is moderately traded rather than a headline-volume name.

Full FEMB profile⁠

Full LEMB profile⁠