Income Solutions Beyond Investment Grade Bonds

Transcription

1 October 2017 Income Solutions Beyond Investment Grade Bonds

2 Multiple Fixed Income Approaches Direction of interest rates Reduce Duration Limit Duration to Near Zero with: Floating rate notes (FRNs) for investment grade corporate note market Interest rate hedged high yield to participate in high yield corporate bond market* Business development companies (BDCs) for exposure to floating rate loans Level of credit risk in the bond market Seek Value in Credit Fallen angel high yield bonds to participate in higher quality high-yield bond market Historically higher average credit quality and total returns than broad high-yield bond market** BDCs for exposure to loans to private companies Preferred securities for attractive yield play International diversification Alternative sources of income Diversify Away from the U.S. Access: Non-U.S. bond markets Hard and local currency-denominated bonds Corporate and sovereign bonds High yield and investment grade Access Income Alternatives BDCs for pure-play publically traded business development company exposure Preferred securities for U.S. preferred stock Source: VanEck. Data as of 9/30/2017. See index descriptions and important disclosures at the end of the presentation. * Declining interest rates will negatively impact performance. ** See slides for more information. 2

3 Yields and performance Yield and 12-month Total Return (as of 9/30/2017) 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% -2.00% -4.00% -6.00% Business Development Companies Preferred (ex- Financials) EM High Yield Corporate EM Local Currency Sovereigns U.S. Fallen Angel High Yield International High Yield U.S.IG Corporates U.S. Agg U.S. 10-year Treasury Global Agg Yield 1-Yr Total Return Source: J.P. Morgan, Bloomberg Barclays, BofA Merrill Lynch, MVIS. Business Development Companies represents the MVIS US Business Development Companies Index. U.S. Fallen Angel High Yield represents the BofA Merrill Lynch U.S. Fallen Angel High Yield Index. International High Yield represents the BofA Merrill Lynch Global Ex-US Issuers High Yield Constrained Index. EM High Yield Corporate represents the BofA Merrill Lynch Diversified High Yield US Emerging Markets Corporate Plus Index. EM Local Currency Sovereigns represents the J.P. Morgan GBI-EM Global Core Index. Preferred (ex- Financials) represents the Wells Fargo Hybrid and Preferred Securities ex Financials Index. U.S. IG Corporates represents the Bloomberg Barclays U.S. Corporate Investment Grade Index. U.S. Agg represents the Bloomberg Barclays US Aggregate Bond Index. 10-year Treasury represents the BofA Merrill Lynch Current 10-Year US Treasury Index. Global Agg represents the Bloomberg Barclays Global Aggregate Bond Index. Yield represents yield to worst, except for Business Development Companies which represents dividend yield and Preferred (ex-financials) which represents current yield. Past performance is no guarantee of future results. Index performance is not representative of fund performance. See index descriptions and important disclosures at the end of the presentation. 3

4 U.S. Income 4

5 Yield (%) Alternative sources of yield Investors still seeking yield, as rates have remained historically low BDCs and mreits offer high yield alternatives Excluding financials offers diversified preferreds exposure with a higher yield/quality tradeoff than HY bonds mreits BDCs U.S. High Yield Bonds Preferreds ex- Financials Preferreds REITs U.S. High Grade Bonds 10 Year Treasury Bonds U.S. Stocks Source: FactSet, Bloomberg. Data as of 9/30/17. Index performance is not illustrative of fund performance. Fund performance current to the most recent month end is available by visiting vaneck.com. Historical performance is not indicative of future results; current data may differ from data quoted. Indices are unmanaged and are not securities in which an investment can be made. Yields presented are current yields (ratio of the annual interest payment and the security s current price), except for equities dividend yield (dividend per share, divided by the price per share). Refer to reverse side for Fund performance, index descriptions and disclosure notes. 5

6 Yield (%) Why invest in business development companies? High income potential relative to other asset classes BDCs are positioned for rising interest rates with over 80%, on average, in floating rate loans Majority of assets are comprised of senior secured loans Yield Comparisons Data as of 9/30/2017 Fixed vs. Floating Rate Data as of 9/30/ Floating Rate Fixed Rate Sources: FactSet, MVBIZDTG Index s underlying BDCs financial statements, as of 6/30/2017, as available on their Web sites. Data presented is based on the Index s composition as of 9/30/2017. Yield data presented is as of 9/30/2017. Past performance is no guarantee of future results. These charts are for illustrative purposes only. Index characteristics are not illustrative of fund performance. Fund performance current to the most recent month end is available by visiting vaneck.com. Historical information is not indicative of future results; current data may differ from data quoted. Indices are unmanaged and are not securities in which an investment can be made. Current data may differ from data quoted. VanEck Vectors BDC Income ETF commenced on 2/11/2013. An investor cannot invest directly in an index. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown. See index descriptions and important disclosures at the end of the presentation. 6

7 8/04/ /30/2011 3/31/2012 7/31/ /30/2012 3/31/2013 7/31/ /30/2013 3/31/2014 7/31/ /30/2014 3/31/2015 7/31/ /30/2015 3/31/2016 7/31/ /30/2016 3/31/2017 7/31/2017 8/04/ /30/2011 3/31/2012 7/31/ /30/2012 3/31/2013 7/31/ /30/2013 3/31/2014 7/31/ /30/2014 3/31/2015 7/31/ /30/2015 3/31/2016 7/31/ /30/2016 3/31/2017 7/31/2017 Dividend Yield (%) Market Capitalization ($ million) Historically attractive yield and market growth Dividend yield averaged 8.7% since inception of the MVIS US Business Development Companies Index (MVBIZDTG) Market capitalization of investable BDC universe, as represented by the MVBIZDTG Index, has grown approximately 89.9% Dividend Yield (%) Data as of 9/30/2017 Market Cap ($ millions) Data as of 9/30/ ,000 30,000 25,000 20,000 15,000 10,000 5, Source: FactSet. Data as of 9/30/2017. The MVBIZDTG Index commenced 8/4/2011. These charts are for illustrative purposes only. Index performance is not illustrative of fund performance. Fund performance current to the most recent month end is available by visiting vaneck.com. Historical information is not indicative of future results. Current data may differ from data quoted. Past performance is no guarantee of future results; VanEck Vectors BDC Income ETF commenced on 2/11/2013. An investor cannot invest directly in an index. The results assume that no cash was added to or assets withdrawn from the Index. Index returns do not represent Fund returns. See index descriptions and important disclosures at the end of the presentation. 7

8 Where BDCs fit in a portfolio Competitive risk/return trade off compared with high yield bonds; leverage loans; and large, mid, and small cap equities Outperformed traditional high yield income strategies and averaged less volatility than other equity strategies historically Equity Comparisons Income Comparisons Source: FactSet. Data as of 9/30/2017. Index performance is not illustrative of fund performance. Fund performance current to the most recent month end is available by visiting vaneck.com. Historical performance is not indicative of future results; current data may differ from data quoted. Indices are unmanaged and are not securities in which an investment can be made. Standard deviation is the statistical measure of the historical return volatility of a portfolio. See index descriptions and important disclosures at the end of the presentation. 8

9 Yield (%) Exclude financials without sacrificing yield Removing traditional financial preferreds increased yield potential 7.00 Yield Comparisons 1 Data as of 9/30/ Preferreds Ex-Financials Credit Quality Data as of 9/30/ Equities 10-Year U.S. Treasury High Preferred Grade Securities Corporate Bonds Preferreds Ex- Financials High Yield Bonds Investment Grade High Yield 2 N/A/NR Source: FactSet, Bloomberg. Data as of 9/30/ Yields presented are current yields (ratio of the annual interest payment and the security s current price), except for Equities dividend yield (dividend per share, divided by the price per share). 2 Not Rated (NR) indicates that a security is rated by fewer than two of the four rating agencies. The broad Preferreds Securities universe presented is represented by the Wells Fargo Hybrid and Preferred Securities Aggregate Index (WAGG). The Preferreds Ex-Financials universe is represented by the Wells Fargo Hybrid and Preferred Securities ex Financials Index (WHPSL). Past performance is no guarantee of future results. Index performance is not representative of fund performance. For fund performance, visit vaneck.com. See index descriptions and important disclosures at the end of the presentation. 9

10 Greater diversification than with broad preferreds Majority of preferred securities are concentrated in the financials sector, which may add unnecessarily to existing financials exposure from other investments Preferreds Ex-Financials Data as of 9/30/2017 Preferred Securities Data as of 9/30/2017 Financial REITs Industrials Technology Energy Utilities Communications Reinsurance Consumer, Non-cyclicals Government Financials REITs Industrial Technology Utilities Communications Reinsurance Source: FactSet, Wells Fargo, Bloomberg. Data as of 9/30/2017. The broad Preferred Securities universe presented is represented by the Wells Fargo Hybrid and Preferred Securities Aggregate Index (WAGG). The Preferreds Ex-Financials universe is represented by the Wells Fargo Hybrid and Preferred Securities ex Financials Index (WHPSL). See index descriptions and important disclosures at the end of the presentation. 10

11 Attractive risk/return characteristics Excluding traditional financials improved the long-term risk/reward trade off relative to other preferreds and competitiveness with equity and high yield Annualized Risk/Return Net of Fees Wells Fargo Hybrid and Preferred Securities Ex-Financials Index (WHPSL) Live Date is 1/03/2012 1/3/2005 9/30/2017 Source: FactSet. Data as of 9/30/2017. The broad Preferreds Securities universe presented is represented by the Wells Fargo Hybrid and Preferred Securities Aggregate Index (WAGG). The Financial Preferreds Index is represented by the Wells Fargo Hybrid and Preferred Securities Financial Index (WHPSF). The Preferreds Ex-Financials universe is represented by the Wells Fargo Hybrid and Preferred Securities ex Financials Index (WHPSL). Historical performance is not indicative of future results; current data may differ from data quoted. Annual total expense ratio of 0.41% has been deducted from the WHPSL Index performance, as well as the other listed indices for comparative purposes. The WHPSL Index was not live prior to 1/3/2012 and any performance prior to this date is hypothetical. Hypothetical index data is based on criteria applied retroactively with the benefit of hindsight and knowledge of factors that may have positively affected its performance and cannot account for all financial risks that may affect the actual performance of the associated ETF, which may vary significantly from this data. Index methodology is available upon request and can be accessed by visiting Index performance is not illustrative of fund performance. Indices are unmanaged and are not securities in which an investment can be made. See index descriptions and important disclosures at the end of the presentation. 11

12 Fallen angels: HY bonds originally issued as IG Relative to the broad high yield bond market, fallen angels have historically averaged Higher concentration of BB-rated bonds Lower yield and higher duration BofA Merrill Lynch US Fallen Angel High Yield Index (H0FA) as of 9/30/ % 3.9% BofA Merrill Lynch US High Yield Index (H0A0) as of 9/30/ % 47.8% 77.0% 37.8% BB B CCC BB B CCC Data as of 9/30/2017 Current Yield to Worst Modified Duration Market Value ($Mil) # of Bonds in Index % of Fallen Angels BofML US Fallen Angel 5.16% , % BofAML US High Yield 5.43% ,314,889 1,877 10% Source: FactSet. Broad high yield bond market is represented by the BofA Merrill Lynch US High Yield Index. Past performance is not indicative of future results. BofA Merrill Lynch ratings are simple averages of ratings from Moody's, S&P, and Fitch, and are not intended to be a credit opinion. Index performance is not representative of fund performance. For fund performance, visit vaneck.com. See index descriptions and important disclosures at the end of the presentation. 12

13 Forced selling prior to downgrade Rating actions tend to be anticipated by the market, and significant price deterioration often has occurred prior to bonds entering the BofAML US Fallen Angel Index Increasing exposure to falling angels, as they enter the BofAML US Fallen Angel Index, with monthly rebalances, often represents a contrarian approach Average fallen angel bond cumulative return from 6 months before to 6 months after entering the BofAML US Fallen Angel Index Data as of 9/30/2017 This chart is for illustrative purposes only. Index performance is not illustrative of fund performance. Fund performance current to the most recent month end is available by visiting vaneck.com/. Historical information is not indicative of future results. Current data may differ from data quoted. Past performance is no guarantee of future results; VanEck Vectors Fallen Angel High Yield Bond ETF commenced on 4/10/2012. An investor cannot invest directly in an index. The results assume that no cash was added to or assets withdrawn from the Index. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown. Source: FactSet. Data is based on bond constituents of the BofAML US Fallen Angel Index that were downgraded to high yield and entered the index in 2004 or later. See index descriptions and important disclosures at the end of the presentation. 13

14 Total Return (%) Outperformed broad high yield bond market Fallen angels outperformed the broad high yield bond market year to date, 10 of the last 13 calendar years and 4 of 5 calendar years when rates rose significantly Federal funds interest rates last rose , Year U.S. Treasury rates last rose by more than 1% in 2009 and 2013 Calendar Year and Year-to-Date Returns 12/31/2003 to Present (20) (40) bps Fed Funds bps Bps 5-Year Bps YTD 5-Year Bps BofAML US Fallen Angel Bloomberg Barclays High Yield Very Liquid Source: FactSet. Data as of 9/30/2017. This chart is for illustrative purposes only. Index performance is not illustrative of fund performance. Fund performance current to the most recent month end is available by visiting vaneck.com. Historical information is not indicative of future results. Current data may differ from data quoted. Past performance is no guarantee of future results; VanEck Vectors Fallen Angel High Yield Bond ETF commenced on 4/10/2012. An investor cannot invest directly in an index. The results assume that no cash was added to or assets withdrawn from the Index. Index returns do not represent Fund returns. Broad high yield bond market is represented by the Bloomberg Barclays High Yield Very Liquid Index. See index descriptions and important disclosures at the end of the presentation. 14

15 Higher risk-adjusted returns Fallen angels have historically offered a more attractive risk/reward tradeoff than the broad high yield bond market 5-Year Historical Annualized Returns and Standard Deviation Data as of 9/30/2017 Entire Period YTD 1 YR 3 YR 5 YR Annualized Return Annualized StdDev Sharpe Ratio BofAML US Fallen Angel BofAML Original Issue High Yield Bloomberg Barclays High Yield Very Liquid Bloomberg Barclays US Aggregate US 10YR Treasury US 5YR Treasury S&P Source: FactSet. Index performance is not illustrative of fund performance. Fund performance current to the most recent month end is available by visiting vaneck.com. Historical performance is not indicative of future results; current data may differ from data quoted. Indexes are unmanaged and are not securities in which an investment can be made. Standard deviation is the statistical measure of the historical return volatility of a portfolio. Sharpe ratio is a statistical measure of the excess return of a portfolio over a risk-free rate of return (as found with a U.S. Treasury security) per unit of the portfolio s standard deviation of returns. Broad high-yield bond market is represented by Bloomberg Barclays High Yield Very Liquid Index. See index descriptions and important disclosures at the end of the presentation. 15

16 International and Emerging Markets Bonds 16

17 Face Amount ($bn) Growth of 10k ($) International high yield bonds Diversified non-u.s. high yield exposure: represent over 45% of the global high-yield market 1 Higher credit quality: Historically lower default rates than U.S. high-yield bonds 2 Reduced interest rate risk: Historically lower duration than U.S. high-yield bonds 3 A significant portion of the global high yield market Historical outperformance versus U.S. HY bonds (12/31/1998 to 9/30/2017) 1,600 1,400 1,200 50,000 40,000 1, ,000 20, , International High Yield Corporate Bonds U.S. High Yield Corporate Bonds International High Yield Corporate Bonds U.S. High Yield Corporate Bonds Past performance does not guarantee future results. Index performance is not indicative of fund performance. Indices are not securities in which investments can be made. Source: BofA Merrill Lynch and Morningstar as of 9/30/2017. International High Yield Corporate Bonds: BofA Merrill Lynch Global ex-us Issuers High Yield Constrained Index; U.S. High Yield Corporate Bonds: BofA Merrill Lynch US High Yield Index. See index descriptions and important disclosures at the end of the presentation. 1 Based on face value of the BofA Merrill Lynch Global ex-us Issuers High Yield Constrained Index as a percentage of the BofA Merrill Lynch Global High Yield Index. 2 Based on the annual average default rate of the BoFA Merrill Lynch Global ex-us Issuers High Yield Constrained Index versus the BoFA Merrill Lynch US High Yield Index from 1999 through Based on the duration of the BoFA Merrill Lynch Global ex-us Issuers High Yield Constrained Index and the BoFA Merrill Lynch US High Yield Index from 7/31/2006 to 9/30/

18 Multiple segments of emerging markets debt Diverse asset class which spans multiple countries, currencies, sectors, credit ratings, and maturities Each segment of emerging markets debt provides a unique risk and return profile Exposure to a single segment may not provide the full diversification potential of the overall opportunity set Hard currency Local currency Sovereign bonds USD & EUR Sovereign Bonds Local Currency Sovereign Bonds Corporate bonds USD & EUR Corporate Bonds Local Currency Corporate Bonds See index descriptions and important disclosures at the end of the presentation. 18

19 Market Capitalization in USD ($B) The market has grown in size and diversity $2.6 trillion in liquid, tradeable assets as of September 30, 2017, versus approximately $900 billion in 2006 Growth driven largely by the emergence of local currency sovereign bonds and corporate bonds Despite this growth, emerging markets debt is significantly underrepresented in global fixed income indices 3,000 The Size and Diversity of Emerging Markets Debt 2,500 2,000 1,500 1, (Sep) EM USD Sovereign EM USD Corporate EM Local Sovereign Past performance does not guarantee future results. Index performance is not indicative of fund performance. Indices are not securities in which investments can be made. Source: J.P. Morgan as of 9/30/2017. EM USD Sovereign represented by J.P. Morgan EMBI Global Index. EM Local Sovereign represented by J.P. Morgan GBI-EM Global Index. EM USD Corporate represented by J.P. Morgan CEMBI Broad Index. See index descriptions and important disclosures at the end of the presentation. 19

20 Government Gross Debt (% of GDP) GDP Growth (%) Favorable fundamentals versus developed markets Manageable debt-to-gdp ratios due to disciplined borrowing and economic growth Higher economic growth vs. DM, with differential expected to widen Significantly Lower Debt to GDP Ratios Versus Developed Markets Historical and Forecasted GDP Growth Advanced economies Emerging Economies Advanced economies Emerging Economies Source: IMF as of April Past performance is no guarantee of future results, which may be lower or higher than current performance. See index descriptions and important disclosures at the end of the presentation. 20

21 Yield (%) Attractive local yields Wide dispersion in local bond performance YTD EM local sovereign real rates remain substantial, versus negative real rates in DM 10 Year Nominal and Real Government Yields Nominal Yield Real Yield Source: Bloomberg as of 9/30/2017. See index descriptions and important disclosures at the end of the presentation. 21

22 Return (%) Two sources of potential return: rates and currencies 30.0 JPM GBI-EMG Core Index: YTD Returns by Country (as of 9/30/2017) (5.0) (10.0) (15.0) Currency Local Rates Total (USD) Source: J.P. Morgan as of 9/30/2017. Past performance is no guarantee of future results. See index descriptions and important disclosures at the end of the presentation. 22

23 Market Value ($bn) Rating Category Index Weight (%) High yield emerging markets corporate bonds High yield emerging markets corporate bonds make up an increasingly large portion of the overall emerging markets corporate bond market, which itself is now as large as the U.S. high yield market. Favorable overall credit quality, with a greater portion of bonds rated BB, and fewer rated B and below, versus high yield U.S. corporate bonds 1,400 1,200 A Growing Market Credit Rating Distribution 1, EM High Yield Corporate Bonds EM Corporate Bonds BB B CCC CC C and below EM High Yield Corporate Bonds US High Yield Corporate Bonds Source: FactSet and BofA Merrill Lynch as of 9/30/2017. U.S. High Yield Corporate Bonds represented by the BofA Merrill Lynch US High Yield Index. EM High Yield Corporate Bonds represented by the BofA Merrill Lynch Diversified High Yield US Emerging Markets Corporate Plus Index. EM Corporate Bonds represented by the BofA Merrill Lynch EM Corporate Plus Index. Past performance is no guarantee of future results. See index descriptions and important disclosures at the end of the presentation. 23

24 Yield to Worst (%) OAS (bps) Higher yield potential and higher credit quality Historically higher yields and spreads versus high yield U.S. corporate bonds Currently a lower effective duration compared to high yield U.S. corporate bonds Yield Comparison (9/30/2006 through 9/30/2017) Spread Comparison (9/30/2006 through 9/30/2017) Oct-06 Oct-08 Oct-10 Oct-12 Oct-14 Oct-16 0 Sep-06 Sep-08 Sep-10 Sep-12 Sep-14 Sep-16 EM HY Corporate Bonds US HY Corporate Bonds EM HY Corporate Bonds US HY Corporate Bonds Source: FactSet and BofA Merrill Lynch as of 9/30/2017. U.S. HY represented by the BofA Merrill Lynch US High Yield Index. EM HY represented by the BofA Merrill Lynch Diversified High Yield US Emerging Markets Corporate Plus Index. See index descriptions and important disclosures at the end of the presentation. 24

25 Summary: high income alternative Equity Comparisons Income Comparisons Source: FactSet. Data as of 9/30/2017. Index performance is not illustrative of fund performance. Fund performance current to the most recent month end is available by visiting vaneck.com. Historical performance is not indicative of future results; current data may differ from data quoted. Indices are unmanaged and are not securities in which an investment can be made. Standard deviation is the statistical measure of the historical return volatility of a portfolio. See index descriptions and important disclosures at the end of the presentation. 25

26 Important Disclosure This material does not constitute an offer to sell or solicitation to buy any security, including shares of any Fund. An offer or solicitation will be made only through a Fund s prospectus or summary prospectus and will be subject to the terms and conditions contained therein. This material and the information provided herein are not directed at or intended for distribution to any person (or entity) who is a citizen or resident of (or located or established in) any jurisdiction where the distribution of these materials and/or the purchase or sale of interests of a Fund would be contrary to applicable law or regulation or would subject a Fund to any registration or licensing requirement in such jurisdiction. Persons who wish to review this material are required to inform themselves about and to observe any legal or regulatory restrictions which may affect their eligibility to make an investment in a Fund. Professional advice should be sought in cases of doubt. THIS MATERIAL MAY ONLY BE PROVIDED TO YOU BY VANECK AND IS FOR YOUR PERSONAL USE ONLY AND MUST NOT BE PASSED ON TO THIRD PARTIES WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF VANECK. IF YOU HAVE NOT RECEIVED THIS MATERIAL FROM VANECK, YOU ARE HEREBY NOTIFIED THAT YOU HAVE RECEIVED IT FROM A NON-AUTHORIZED SOURCE THAT DID NOT ACT ON BEHALF OF VANECK AND THAT ANY REVIEW, USE, DISSEMINATION, DISCLOSURE OR COPYING OF THIS MATERIAL IS STRICTLY PROHIBITED. BEFORE MAKING AN INVESTMENT DECISION, PLEASE CONSULT A QUALIFIED INVESTMENT AND TAX ADVISOR. Any projections, market outlooks or estimates in this material are forward-looking statements and are based upon certain assumptions that are solely the opinion of VanEck. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. Further, any information regarding portfolio composition, portfolio composition methodology, investment process or limits, or valuation methods of evaluating companies and markets are intended as guidelines which may be modified or changed by VanEck at any time in its sole discretion without notice. Any performance presented herein represents past performance and is for illustrative purposes only. Past performance is not indicative of future results; current data may differ from data quoted. An index s performance is not illustrative of a fund s performance. You cannot invest in an index. Diversification does not assure a profit or protect against loss. Forecasts, estimates, and certain information contained herein are based upon proprietary research and the information contained in this material is not intended to be, nor should it be construed or used as investment, tax or legal advice, any recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security. References to specific securities and their issuers or sectors are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities or gain exposure to such sectors. The Fund(s) may or may not own the securities or be exposed to the sectors referenced and, if such securities are owned or exposure maintained, no representation is being made that such securities will continue to be held or exposure maintained. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck VanEck. Van Eck Securities Corporation, Distributor, 666 Third Avenue, New York, NY

27 Important Disclosure Fund shares are not individually redeemable and will be issued and redeemed at their net asset value (NAV) only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Returns for actual Fund investments may differ from what is shown because of differences in timing, the amount invested, and fees and expenses. The Fund may loan its securities, which may subject it to additional credit and counterparty risk. The principal risks of investing in VanEck Vectors ETFs include sector, market, economic, political, foreign currency, world event, index tracking and non-diversification risks, as well as fluctuations in net asset value and the risks associated with investing in less developed capital markets. The Fundsmay loan their securities, which may subject them to additional credit and counterparty risk. ETFs that invest in high-yield securities are subject to subject to risks associated with investing in high-yield securities; which include a greater risk of loss of income and principal than funds holding higher-rated securities; concentration risk; credit risk; hedging risk; interest rate risk; and short sale risk. Investors should be willing to accept a high degree of volatility and the potential of significant loss. High yield bonds may be subject to greater risk of loss of income and principal and are likely to be more sensitive to adverse economic changes than higher rated securities. ETFs that invest in companies with small capitalizations are subject to elevated risks, which include, among others, greater volatility, lower trading volume and less liquidity than larger companies. Investors should be willing to accept a high degree of volatility and the potential of significant loss. Please see the prospectus and summary prospectus of each Fund for more complete information regarding each Fund's specific risks. Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates ("BofA Merrill Lynch") indices and related information, the name "BofA Merrill Lynch", and related trademarks, are intellectual property licensed from BofA Merrill Lynch, and may not be copied, used, or distributed without BofA Merrill Lynch's prior written approval. The licensee's products have not been passed on as to their legality or suitability, and are not regulated, issued, endorsed, sold, guaranteed, or promoted by BofA Merrill Lynch. BOFA MERRILL LYNCH MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE INDICES, ANY RELATED INFORMATION, ITS TRADEMARKS, OR THE PRODUCT(S) (INCLUDING WITHOUT LIMITATION, THEIR QUALITY, ACCURACY, SUITABILITY AN D/OR COMPLETENESS). The S&P 500 Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright 2017 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC s indices please visit S&P is a registered trademark of S&P Global and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein. See index descriptions at the end of this presentation. VanEck methodology for the fallen angel bond sample set began with the H0FA index bond constituents that had more than six months performance and entered the index in 2004 or later. Fallen angel bond price levels were captured and cumulative returns were calculated, isolating 12 months of performance beginning six months prior to index entry through six months after entry. (See page 13) Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing. 27

28 Index Descriptions The indices listed are unmanaged indices and do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in a Fund. An index s performance is not illustrative of a Fund s performance. Indices are not securities in which investments can be made. BDCs: The MVIS US Business Development Companies Index is a rules-based index intended to track the overall performance of Business Development Companies (BDC). REITs: FTSE NAREIT Equity REITs Index is a broad-based, free-float adjusted market capitalization weighted index consisting of equity real estate investment trusts. U.S. High Yield Bonds: BofA Merrill Lynch US High Yield Index (H0A0) tracks the performance of U.S. dollar-denominated below investment grade corporate debt publically issued in the U.S. domestic market. Qualifying securities must have a below investment grade rating. U.S. Investment Grade Bonds: Barclays Capital US Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities, commercial mortgage-backed securities. U.S. Leveraged Loans: S&P/LSTA U.S. Leveraged Loan 100 Index seeks to mirror the market-weighted performance of the largest institutional leveraged loans as determined by criteria based upon market weightings, spreads, and interest payments. U.S. Small Cap Stocks: Russell 2000 Index is an index measuring the performance approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. U.S. Mid Cap Stocks: Russell Midcap Index measures performance of the 800 smallest companies (31% of total capitalization) in the Russell 1000 Index, with weighted average market capitalization of approximately $6.7 billion, median capitalization of $3.6 billion, and market capitalization of the largest company $13.7 billion. U.S. Stocks: Standard & Poor s 500 Index, calculated with dividends reinvested, consists of 500 widely held common stocks covering the industrial, utility, financial and transportation sectors. Utilities: Standard & Poor s 500 Utilities Index, calculated with dividends reinvested, consists of widely held utility common stocks of the Standard & Poor s 500 Index. BofAML US Fallen Angel: BofA Merill Lynch US Fallen Angel High Yield Index (H0FA) is a subset of the BofA Merrill Lynch US High Yield Index including securities that were rated investment grade at point of issuance. BAML US Corp Fallen Angel Bond: BofA Merill Lynch US Fallen Angel High Yield Index (H0FA) is a subset of the BofA Merrill Lynch US High Yield Index including securities that were rated investment grade at point of issuance. BAML US Corp Bond: BofA Merill Lynch US Corporate Index (C0A0) is comprised of U.S. dollar denominated investment grade corporate debt securities publicly issued in the U.S. domestic market with at least one year remaining term to final maturity. Bloomberg Barclays High Yield Very Liquid: Barclays Capital US High Yield Very Liquid Index is a more liquid version of the Bloomberg Barclays Capital US Corporate High-Yield Index that measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Qualifying issues must have been issued within the past three years, have a USD 600 million minimum amount outstanding and include only the largest issue from each issuer. Mortgage REITS: MVIS US Mortgage REITs Index (MVMORTTG) is intended to track the overall performance of U.S. mortgage real estate investment trusts. Preferred Securities: Wells Fargo Hybrid and Preferred Securities Aggregate Index (WAGG) is designed to track the performance of non-convertible, $25 par preferred securities listed on U.S. exchanges. The index is composed of preferred stock and securities that, in Wells Fargo s judgment, are functionally equivalent to preferred stock. Preferreds Ex-Financials: Wells Fargo Hybrid and Preferred Securities ex Financials Index (WHPSL) is a rules-based index designed to track the performance of convertible or exchangeable and non-convertible preferred securities, issued by U.S. or foreign issuers that are not financial services companies or banks and that are listed on U.S. national securities exchanges. Financial Preferreds: Wells Fargo Hybrid and Preferred Securities Financial Index (WHPSF) is a rules-based index designed to track the performance of convertible or exchangeable and non-convertible preferred securities, issued by U.S. or foreign issuers that are financial services companies or banks and that are listed on U.S. national securities exchanges. 28

29 Index Descriptions Bloomberg Barclays Global Aggregate Index tracks investment-grade debt from twenty-four local currency markets, and is comprised of treasury, government-related, corporate, and securitized fixed-rate bonds from developed and emerging markets issuers. Bloomberg Barclays US Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, governmentrelated and corporate securities, MBS, ABS and CMBS. Bloomberg Barclays U.S. Corporate Investment Grade Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD denominated securities publicly issued by U.S. and non-u.s. industrial, utility and financial issuers. BofA Merrill Lynch Current 10-Year US Treasury Index is a one-security index comprised of the most recently issued 10-year U.S. Treasury bond. To qualify for inclusion, the 10-year bond must be auctioned on or before the third business day before the last business day of the month. BofA Merrill Lynch Diversified High Yield US Emerging Markets Corporate Plus Index is comprised of U.S. dollar-denominated bonds issued by non-sovereign emerging markets issuers that are rated below investment grade and that are issued in the major domestic and Eurobond markets. BofA Merrill Lynch Global Ex-US Issuers High Yield Constrained Index is comprised of U.S. dollar, Canadian dollar, pound sterling, and euro denominated below investment grade corporate bonds issued by non-u.s. corporations in the major domestic or Eurobond markets.. J.P. Morgan CEMBI Broad Index tracks USD-denominated emerging markets corporate bonds. J.P. Morgan EMBI Global Index tracks USD-denominated sovereign bonds J.P. Morgan GBI-EM Global Index tracks emerging markets local government bonds that are accessible by most foreign investors. J.P. Morgan GBI-EMG Core Index tracks bonds issued by emerging markets governments and denominated in the local currency of the issuer. he index weighting methodology limits the weight of countries with larger debt stocks, with a maximum of 10% and a minimum of 3%. 29