Identification

• Emerging markets represent economies that are still developing, as opposed to proven and leading economies of the world. Some emerging market countries, according to the MSCI Emerging Market Index, include Russia, India and China. A debt ETF is an index fund that contains many different bond securities and is designed to track the performance of another market index. These funds are listed on major stock exchanges under a trading symbol so that daily market activity can be determined.
  
  

Features

• According to the website ETFdb, introducing emerging market debt ETFs to an investment portfolio achieves geographic diversification. In January 2011, bond investor Bill Gross of investment firm PIMCO expressed concerns about the health of the U.S. economy. As a result, the article suggested that more investors should consider international debt. ETFs are an efficient way to do that because buying individual foreign debt securities can be complex, expensive and risky. ETFs streamline the process and give investors exposure to multiple debt securities.
  
  

Types

• Investors can select ETFs that buy bonds that are denominated in U.S. dollars even though the debt securities are issued by foreign economies, according to investment website The Motley Fool. Emerging market ETFs may also buy foreign debt that remains denominated, or expressed, in an international currency. Yields, or returns expressed as a percentage, in emerging market debt ETFs can be more rewarding than stock ETFs, according to The Motley Fool, but there are also some risks.
  
  

Risks

• Emerging market debt ETFs that remain denominated in a foreign currency carry certain risks. These investments are vulnerable to changes in the exchange rate for the foreign currency, in addition to changes in the value of the bond investments. A benefit is if the value of the emerging market currency increases versus the domestic currency, such as the U.S. dollar, profits rise. All emerging market bond ETFs could be influenced by both economic and political instability in a region, according to The Motley Fool.