Bull & Bear's Mutual Funds

       Walter Frank: “It certainly has not been smooth sailing this year for investors. As of December 2, the US stock market, as measured by the S&P 500, had advanced only 0.87%. Some investors are looking overseas for better returns and the appeal of dividends and income is strong. Accordingly, here we feature two international funds which focus on income.
       iShares JPMorgan USD Emerging Markets Bond (NYSE: EMB): Emerging markets and bonds – sounds risky. Not only is this ETF investing in emerging markets, which sport increased economic and political risk, it is also investing in government bonds therein, thus courting interest rate and inflation risk as well. However, the payoff for assuming some increased risk here can be significant in terms of relative returns and yield.
       The emerging markets overall, and the debt category in particular, have garnered increasing investor assets over the past year. After all, economic growth in these markets has far surpassed the lackluster gains in developed markets. Plus, with the sovereign debt crisis in Europe, investors have looked to emerging markets as a viable alternative since, despite lower credit ratings, these nations also have lower debt levels.
       And so on to the basics of this fund – which tracks the JPMorgan EMBI Global Core Index. The index is a broad US dollar-denominated emerging markets debt benchmark, “which tracks the total return of actively traded external debt instruments in emerging markets countries.” It includes fixed and floating-rate debt issued by sovereign and quasi-sovereign entities from eligible countries (quasi-sovereign meaning government-owned entities or those with a 100% government guarantee). These instruments must be denominated in US dollars, have a current outstanding face amount of at least $1 billion, have at leas two years to maturity, and meet other liquidity requirements. The index has holdings from 35 different nations, and an average duration (a measure of interest rate sensitivity) of 7.2 years. The index is market value-weighted, meaning the nation’s with the most debt have the heaviest weighting in the index.
       The fund recently had 101 individual holdings, with about 32% of assets invested in the top ten. Its average S&P credit rating was BB-, and the portfolio had a yield of 4.78%. This year, the fund has gained 6.35% through December 2, placing it in the top third of its emerging markets bond Morningstar peer group.
       WisdomTree Middle East Dividend (Nasdaq: GULF): WisdomTree dividend based ETFs are included in Moneyletter’s fund coverage. These funds are weighted based on dividends, based in part on the philosophy that cash dividends paid are on an objective measure of a company’s value and profitability – one that cannot be manipulated.
       In this fund, the underlying WisdomTree Middle East Dividend Index measures the stock market performance of companies that pay regular cash dividends on common stock, from the countries of Bahrain, Egypt, Kuwait, Jordan, Morocco, Oman, Qatar, and United Arab Emirates. The index imposes a minimum cash dividend payout, liquidity requirements, and market capitalization. The largest 100 companies meeting these criteria are selected for inclusion in the index.
       About half of the portfolio is invested in large-cap stocks, 35% in mid-caps, and the reminder in the small-cap range. As you can see from the portfolio statistics, this is a concentrated portfolio, with significant assets in financial and telecommunications services stocks, as well as in the leading three nations. Even when looking at individual holdings, the portfolio shows its concentration. Top holding, Mobile Telecommunication of Kuwait, accounts for 13% of assets. All told, nearly 61% of net assets are invested in the top ten holdings (there are 38 total stocks in the portfolio).
       The fund lagged its Morningstar Diversified Emerging Markets peers in its first full year of operation (2009), but bested more than half the group in 2010. This year, it’s in the top 1% of the group, though with a -7.8% return. The recent portfolio yield was 6.7%.”