SPDR ETFs, the exchange-traded fund (ETF) platform of State Street Global Advisors (SSgA), has launched a new fund that provides access to a diversified portfolio of investment-grade and high-yield emerging market corporate debt denominated in USD.
The fund offers exposure to bonds issued by companies based in emerging markets such as Qatar, which has a 3.1% weight.
The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond UCITS ETF (EMCB), which has been listed on the London Stock Exchange and the Deutsche Börse, extends the platform’s coverage of emerging fixed income.
The fund, which is physically-backed and managed by SSgA’s specialist bond team, tracks the BofA Merrill Lynch Emerging Markets Diversified Corporate ex-144a Index, a broad, well-established covering approximately 25 markets, 600 issues and 230 issuers, with a minimum rating floor of CCC.
The index has a yield to maturity of 4.1% with an average maturity of 8.2 years. Industrials account for 70.9% of the index, with financials and utilities making up the remainder with 22.2% and 6.9% respectively. The index’s largest country weights are Brazil (18.0%), Russia (13.9%) and Mexico (10.6%).
Investors have become increasingly interested in emerging market corporate bonds owing to the attractive yield opportunities and strong fundamentals they offer in comparison to developed corporate bond markets.
“Investor interest in emerging markets continues to grow because of the positive long-term growth story. Clients are looking for opportunities to diversify their portfolios within emerging markets across both equity and fixed income. ETFs provide a liquid, diverse and cost-effective way to achieve that,” says Scott Ebner, global head of product development at SPDR ETFs.
The fund has a total expense ratio (TER) of 0.50% and is registered for sale in the UK, Ireland, Sweden, Holland, Italy, Germany and France. It is in the process of seeking UK Reporting Status.
The fund compliments SSgA’s existing emerging market bond funds, the SPDR Barclays Emerging Markets Local Bond UCITS ETF (EMDL) and the SPDR CITI Asia Local Government Bond ETF (ABND), which offer exposure to global emerging market and Asian local government bond markets, respectively.
There are now 44 SPDR ETFs listed on European exchanges including the London Stock Exchange and Deutsche Börse.
An alternative to the new SPDR fund is the iShares Morningstar $ Emerging Markets Corporate Bond ETF (EMCP), which is listed on the London Stock Exchange. This fund launched in April 2012 and has accumulated more than £41m in assets. It too comes with an annual TER of 0.50%.