Investors have been rewarded by international equities and the related ETFs. However, stocks aren’t the only game in town when it comes to ex-U.S. investing. Bonds deserve their accolades as well, including emerging markets debt.
Access to the once exotic asset class is easy, thanks to exchange traded funds such as the WisdomTree Emerging Markets Local Debt Fund (ELD). The actively managed ELD, which turns 16 years old in August, compensates investors for the risks associated with emerging markets debt. A 30-day SEC yield of 6.46% highlights that.
However, ELD isn’t just a yield. It’s a total return concept, too. Over the past year, the ETF beat the Bloomberg US Aggregate Bond Index by a 3-to-1 basis. That doesn’t imply that ELD upside from here is limited. Actually, an array of favorable fundamental factors support a bullish outlook for the fund.
ELD Has Wind at Its Back
The case for emerging markets debt and ETFs such as ELD is supported by easier monetary policy at many of those nations’ central banks as well as the slack U.S. dollar. There’s more to the story, though.
“Looking ahead, we expect the strong performance of emerging market local debt to continue through the first half of 2026, supported by both currency appreciation and declining government bond yields. Economic fundamentals across emerging markets remain stable and, in many cases, are improving,” noted Behnood Noei, director of fixed income at WisdomTree.
Advisors and investors also ought to consider the leverage some developing economies have to commodities prices, which are surging. Higher commodities benefit the countries producing those materials by lifting GDP growth. That improves tax receipts and supports higher credit ratings.
“Emerging market sovereign credit offers the highest exposure to commodities among EM asset classes, including equities, currencies, and corporate credit. We continue to see upside potential in metals such as gold and copper, supported by favorable supply and demand dynamics, even after recent price gains,” added Noei.
ELD has significant commodities exposure as debt issued by Indonesia, Brazil and South Africa combines for more than 27% of the ETF’s roster. Commodities are just one catalyst for this ETF. It’s important to consider the multiple catalysts that support a constructive 2026 view for this fund.
“We believe these conditions are likely to remain in place through 2026, making EM local debt a compelling addition to a diversified fixed income portfolio. That said, as with most asset classes, not all issuers are created equal. Active management is essential to identify opportunities and manage risk, and this is where ELD stands out,” concluded Noei.
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