使用JMED进行新兴市场债务风险敞口

After learning about JEMD from two other SA contributors, I investigated and purchased some. I provided links to those articles for JEMD details.

I will then cover what criteria I used in making that decision. I will also list criteria I did not consider in my decision to buy.

I will compare JEMD to Nuveen\'s Credit Opportunities CEF as an alternative to buying JEMD.

I will conclude by explaining how JEMD fits into my overall retirement investment strategy.

Nuveen Emerging Markets Debt 2022 Target Term Fund CEF (NYSE:

JEMD

) invests in Emerging Market country debt, other "Third World" country debt, and EM company debt with a current yield of 5.27%. It is scheduled to liquidate on 12/1/2022, an important reason I chose this investment. I'm skipping an in-depth analysis as I believe that was done well by Maks F. S. (

JEMD - Pinch Your Nose As You Buy It

) and Stanford Chemist (

2 Target Term Closed-End Fund Ideas

)

Since I decided I wanted EM Debt exposure, a potentially important statistic I ignored was the bond ratings of the countries and companies included in JEMD. I wasn't surprised that none were rated investment grade. A clear majority is BB to B-, with 6% rated below that. I picked JCO as alternative based in this statistic.

Another statistic I ignore is the current market price to the fund's targeted redemption price. Not having owned a Term CEF before, I cannot put a probability on that happening. Also, I think my second criteria might cover that possibility.

You will notice below that the average coupon is 1.37% higher than what the distribution yield equals. This is due to Nuveen's Distribution Management Policy. In short, they want stable distributions (earnings drop as bonds mature and proceeds are held as cash until the 12/22 termination date) and to preserve funds to meet the goal of liquidating at $9.85. For details on that:

Understanding Nuveen's CEF Distribution Management

The above table shows how the statistics for JEMD changed over the past year. I included JCO because its holdings match well against JEMD as far as credit goes. Before buying JEMD over JCO, you need to ask, "Are you getting paid for the risk of buying non-US debt?". Based on these statistics (mainly the large differences in discount and price/par ratio), I would say yes.

Source: Bloomberg

Since the inception of JEMD, JCO has performed much better. This is one reason its current statistical outlook seems less favorable than JEMD currently. One must also consider JCO as almost exclusively junk corporate debt whereas JEMD is only 44% in corporates, the rest being country debt. Countries are less likely to default on their debts (Argentina & Venezuela being exceptions to the rule and not owned by JEMD), thus despite having similar credit ratings, JEMD seems less risky on that count than JCO.

I own several Preferred, High Yield, and BDCs for income. I was looking for another fixed income asset that would yield more than 6% but not expose me to a large loss if interest rates soared. I already owned either Term or Preferred assets maturing in all years between 2021 and 2024 except for 2022. With JEMD meeting the criteria I set, I bought it for two of our IRA accounts where we hold most of our income generating assets. One of those IRAs must start RMDs in 2022. Bottom line: The Risk/Reward of this CEF met my investment guidelines and met a need I had.

While JEMD was a buy last fall, it does not meet all my criteria today as the price has rallied 18% from the December low. The price has dropped from its 52-week high of 9.09 (3/7/19) and if the discount gets back to 6% (slightly more than the 12-month average), I would consider adding to our position(s). For those looking for a mutual fund with a good track record in EM debt, consider Fidelity's New Market Income Fund (

FNMIX

); which we also own.

Visit

JEMD

- Nuveen Emerging Markets Debt 2022 Target Term Fund | Closed-End Fund | Nuveen for up-to-date information on JEMD.

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.