This is an actively managed bond ETF that invests in bonds issued by emerging market governments and institutions in their local currencies. By investing in local currency bonds rather than dollar-denominated ones, it seeks high interest income along with currency exposure.

It suits risk-tolerant investors who want high interest income and are willing to accept exchange rate swings and credit risk in emerging market local currencies.

It is an ETF run by First Trust using an active management approach.

The fund actively invests in bonds issued by emerging market governments and institutions in their local currencies. Unlike emerging market bonds issued in dollars, it takes local currency exposure directly, so it pursues high interest income, but the strength or weakness of emerging market currencies weighs heavily on performance.

• Invests in emerging market local currency bonds
• Combines high interest income with currency exposure

Assets under management (AUM) stand at $372.0M, and the total expense ratio (Expense Ratio) is 0.85% per year.

Compared with EMB, a dollar-denominated emerging market bond ETF, the main points of comparison are local currency exposure and currency risk.

Emerging market local currency bonds are driven by each country's interest rates, the strength of emerging market currencies, and global risk appetite. They tend to rise when emerging market currencies are strong and risk appetite is improving, and to weaken during periods of dollar strength or risk aversion. Currency variables weigh heavily on performance.

Fund flows into emerging market local currency bonds diverge sharply depending on the emerging market rate outlook, currency trends, and risk appetite, and demand attracted by high interest income can also shift money into related products. It is also worth noting that performance can vary widely with emerging market currencies and interest rates.

High interest income and currency diversification are both strengths and risks, and exchange rate swings, credit risk, and high volatility are the considerations to weigh.

For other emerging market local currency bond exposure, EMLC is a direct substitute, and for a different approach to emerging market local currency bonds, products such as EBND are also worth comparing. Investors who prefer dollar-denominated emerging market government bonds can also consider products such as VWOB. The three products shown in the table, EMB, GOVT, and SHV, are dollar-denominated emerging market bonds and US Treasuries, respectively, and differ in currency and credit. This ETF's distinguishing factor is its narrowly focused exposure to emerging market local currency bonds.

Here are the points to review before investing in FEMB. High interest income and currency diversification are appealing, but exchange rate swings, credit risk, and high volatility need to be checked beforehand. It is also a good idea to compare it with dollar-denominated emerging market bond products.

Weakness in emerging market currencies against the dollar and a deteriorating credit environment are the main variables for performance, and overlapping currency and credit risks make volatility high. High interest income can be offset by currency losses, so investors should approach the fund with a thorough understanding of the risks.

It is a suitable candidate for risk-tolerant investors who want high interest income and can accept emerging market currency risk. To reduce currency risk, consider dollar-denominated emerging market bond products such as EMB and VWOB, and if you want local currency exposure, compare them with this product before choosing.