SPDR® DoubleLine® Emerging Markets Fixed Income ETF (EMTL) – Q4 2023 Commentary
For the quarter ended December 31, 2023, the DoubleLine Emerging Markets Fixed Income ETF significanly outperformed the J.P. Morgan Corporate Emerging Markets Bond Index Broad Diversified (CEMBI BD) return of 5.52%.
Performance Commentary
Emerging markets (EM) sovereign and corporate bonds generated positive performance amid a rally in global interest rates and risk sentiment. The rate rally kicked off in mid-October, driven by increasing bets that the Federal Reserve (Fed) would lower interest rates much sooner and more aggressively than previously expected. The shift in investor sentiment was a result of slowing inflation and cooling labor market data, which supported a dovish pivot in the Fed’s policy stance in December. The portfolio’s outperformance was largely driven by asset allocation. Over the quarter, the portfolio maintained an overweight to sovereign and quasi-sovereign debt which contributed to performance as these assets benefitted from the fall in rates. In addition, the portfolio kept a longer duration than the CEMBI BD and was overweight Latin America, which generated the strongest regional returns within the index.
Fund Performance
| QTD | YTD |
1 Year |
3 Year |
5 Year |
10 Year |
Since Inception Apr 13 2016 |
|
|---|---|---|---|---|---|---|---|
| NAV | 6.07% | 9.11% | 9.11% | -1.86% | 1.73% | - | 2.57% |
| Market Value | 6.38% | 9.60% | 9.60% | -1.90% | 1.81% | - | 2.63% |
| JP Morgan Corporate Emerging Market Bond Index Broad Diversified | 5.52% | 9.08% | 9.08% | -1.15% | 3.19% | 3.77% | 3.47% |
Source: State Street Global Advisors, as of December 31, 2023. Past performance is not a reliable indicator of future performance. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quotes. All results are historical and assume the reinvestment of dividends and capital gains. Visit www.ssga.com for most recent month-end performance. The gross expense ratio is the fund’s total annual operating expense ratio. It is gross of any fee waivers or expense reimbursements. Performance returns for periods of less than one year are not annualized. The market price used to calculate the Market Value return is the midpoint between the highest bid and the lowest offer on the exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. If you trade your shares at another time, your returns may differ. It is not possible to invest directly in an index. Index performance does not reflect charges and expenses associated with the fund or brokerage commissions associated with buying and selling a fund. Index performance is not meant to represent that of any particular fund.
Gross Expense Ratio: 0.65% Net Expense Ratio: 0.65%
Fourth Quarter Fund Positioning
- The duration of the fund was unchanged, ending the quarter at 4.37 years.
- The portfolio reduced its allocation to sovereign debt and increased its exposure to corporates.
Country and Region Weights
| Country | Weight (%) |
|---|---|
| Mexico | 12.50 |
| Peru | 12.00 |
| Colombia | 10.60 |
| Indonesia | 9.30 |
| Chile | 9.30 |
| Brazil | 9.20 |
| India | 7.00 |
| Singapore | 6.60 |
| Panama | 5.00 |
| South Africa | 2.70 |
| Korea | 2.20 |
| United Arab Emirates | 2.00 |
| Israel | 1.80 |
| Kuwait | 1.60 |
| Guatemala | 1.50 |
| Paraguay | 0.70 |
| Saudi Arabia | 0.70 |
| Jamaica | 0.00 |
| Cash & Accrued | 5.20 |
| Total | 100 |
| Region | Weight (%) |
|---|---|
| Latin America and Caribbean | 60.90 |
| Asia | 25.10 |
| Africa And The Middle East | 8.80 |
| Cash & Accrued | 5.20 |
| Total | 100 |
Source: DoubleLine, State Street Global Advisors, as of December 31, 2023. Allocations are as of the date given and should not be relied upon as current thereafter.
Fund Positioning and Outlook
Broadly speaking, we expect global financial markets to stay stable through the first quarter of 2024. Over the last months, we have seen continued disinflation progress and cooling economic data, clearing the runway for central banks to begin their rate-cutting cycle. We expect central banks to be cautious of monetary policy divergences, particularly with respect to the Fed, who has yet to start its easing cycle. Overall, credit fundamentals for EM corporates have remained resilient. Looking ahead, higher GDP growth for emerging markets is likely to continue relative to developed markets which should allow EM corporates to remain resilient over the medium to long term. We do, however, expect to see some credit metric weakening in the coming year. The portfolio will maintain its significant underweight to Eastern Europe while continuing to favor Latin America. Risk appetite in 2024 likely will be driven by expectations around developed markets central banks’ monetary-policy cycles, global growth and inflation concerns, the US and international election cycles, China’s fiscal and monetary stimulus measures, and geopolitical spillover from the Israel-Hamas conflict. Other factors to watch include China-Taiwan tensions, the Russia-Ukraine war, the Chinese property sector, and stress in the global banking sector.