Combining Emerging Market Corporate Bonds with Equities can Reduce Risk

Research out of WisdomTree Research suggests that investors can reduce volatility in their emerging markets investments by combining emerging market bonds with equities. By doing this, the new allocation has the potential to lower volatility during difficult periods for equity markets, according to Jeremy Schwartz, Director of Research at WisdomTree.

Schwartz's latest research suggested that a hypothetical 50/50 split between USD denominated emerging market corporate bonds and emerging market equities had a 6.3 percent higher return and 10 percent lower volatility than a 100 percent allocation in emerging market equities alone. The blended allocation resulted in risk levels similar to the S&P 500, but produced higher returns.

WisdomTree's Emerging Markets Corporate Bond ETF trades under the ticker (Nasdaq: EMCB). The most popular emerging market ETF is iShares MSCI Emerging Markets (NYSE: EEM).

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